JSW Steel forms record session count pattern; bulls may take a breather

The stock of JSW Steel Limited has witnessed over 49 per cent upside from the low of Rs 428.50, which was registered on March 25, 2021.    

During this northward journey, the stock has marked the sequence of higher highs & higher lows for nine consecutive trading sessions, which resulted in the formation of a bullish record session count candlestick pattern thereby, further suggesting that the bulls may take a breather.    

This is an extremely rare pattern and usually occurs at the top of an uptrend. Generally, we rely on the typical momentum indicators or oscillators for recognising an overbought & oversold condition of the stock. However, this Japanese candlestick pattern gives us a unique way to recognise the time when the momentum is about to wane out.  

The momentum indicators are also supporting the same phenomenon. The stochastic has given a bearish crossover on the daily chart and it is in a falling mode. The leading indicator i.e. the 14-period daily RSI is in an extremely overbought region as it is currently quoting at 89.47 levels. Interestingly, since the last three trading sessions, most of the momentum indicators including stochastic, are showing a negative divergence on the daily chart. The price has marked the higher highs, but the indicators have not reached the prior highs. The Commodity Channel Index (CCI) is also supporting the same phenomenon.     

These abovementioned factors are giving some suspicious vibes about the continuity of vertical rise. Hence, Friday’s and Monday’s sessions are going to be an important one to watch out for the stock. Any sustainable move or close below the prior day’s low may trigger some profit booking.