Hindalco Industries forms a double bottom pattern

After registering a high of Rs. 207.30 on November 07, the stock of Hindalco Industries Limited had entered into a downtrend and recorded series of lower highs and lows. As on November 15, 2019, the stock had formed a swing low of Rs. 187.15, where it had formed a Reversal Morning Star like candlestick pattern and, thereafter, the stock prices rebounded to touch the level of Rs. 194.85. However, the stock failed to hold on to higher levels and price attempted to return to the previous trend. Nonetheless, the bears were not able to push prices much lower and stock registered an almost identical bottom as on November 22, 2019. This resulted in the formation of Adam and Adam's Double Bottom pattern.
 
On Monday, the stock has given a breakout above the neckline of the double bottom pattern. This breakout was confirmed by the above 50-day average volumes. With this pattern breakout, the stock has also managed to close above its long and short term moving averages, that is, 20-day EMA, 50-day EMA, 100-day EMA, and 200-day EMA. The 14-period daily RSI is quoting at 58.52 and it is in rising trajectory, which suggests a bullish bias. The daily stochastic oscillator is suggesting some bullish strength as well since %K is above the %D. Moreover, a positive divergence was also spotted at the daily time frame on the RSI, which indicates limited downside. Positive divergence occurs when the price is making a lower low, while the RSI forms a higher low.
 
Going ahead, we expect the bias to remain positive as long as the stock sustains above Monday’s low of Rs. 190.35 level. On the higher side, the level of Rs. 204, followed by Rs. 207, would be seen as the next resistance zone for the stock.
 
On Monday, the stock of Hindalco Industries closed at Rs. 198.75 per share, up by 4.47 per cent. The stock had opened at Rs. 191.50 per share and hit an intraday high of Rs. 200.65 and a low of Rs. 190.35 per share on NSE.