IOC forms a Double Bottom pattern

The stock of Indian Oil Corporation Limited, after registering a high of Rs. 170.75 in the first week of June, had entered into a downtrend and recorded series of lower high and low. As on August 22, 2019, the stock had formed a swing low of Rs. 116.40 and the next day, it formed a bullish engulfing candlestick pattern and thereafter, the stock prices rebounded to touch the level of Rs. 128. However, the stock failed to hold on to higher levels and failed in attempts to return to the previous trend. But the bears were not able to push prices much lower and the stock registered an almost identical bottom as on September 03, 2019. This resulted in the formation of Adam and Adam double bottom pattern.

On Friday, the stock has given breakout above the neckline of double bottom formation, backed by strong volumes. Additionally, the stock formed a sizeable bullish candle on breakout day, which adds strength to the breakout. The short term trend of stock is bullish as it is trading above its weekly pivot and above the short term moving averages, i.e. 13-day EMA and 20-day EMA. The 14-period daily RSI is quoting at 53.35 and it is in rising trajectory, which suggests bullish bias. The daily MACD also stays bullish as it is trading above the zero line for the past 13 trading sessions. The histogram is suggesting that the upward momentum is picking up. Moreover, a positive divergence was also spotted at the daily time frame on the RSI, which indicates limited downside. A positive divergence occurs when the price is making a lower low, while the RSI forms a higher low.

Going ahead, the stock has strong support in the zone of Rs. 123.50-123, while on the higher side, the major resistance is placed in the zone of Rs. 133-134 level.