Maruti forms double bottom pattern

The stock of Maruti Suzuki India Limited, after registering a high of Rs 7,758.70 in the last week of October 2019, had entered into a downtrend and recorded series of lower high and low. As on March 24, 2020, the stock had formed a swing low of Rs 4,030 where it had formed a reversal hammer like candlestick pattern and thereafter, the stock prices rebounded to touch the level of Rs 5,159.40. However, the stock failed to hold on to the higher levels and attempts to return to the previous trend. But the bears were not able to push the prices much lower and so, the stock registered an almost identical bottom as on April 03, 2020. This resulted in the formation of Adam & Adam double bottom pattern.

On Friday, the stock had given a breakout above the neckline of double bottom formation, backed by strong volumes. Additionally, the stock formed a sizeable bullish candle on the breakout day, which adds further strength to the breakout. Along with this pattern breakout, the stock after a span of over two months, has managed to successfully close above its crucial short-term moving average i.e. 20-day EMA. The leading indicator, 14-period daily RSI, is quoting at 51.85 and it is in rising trajectory, which suggests a further bullish momentum. The daily MACD stays bullish as it is trading above its zero line.

Going ahead, we expect the bias to remain positive as long as the stock sustains above Friday’s low of Rs 4,736 level. On the higher side, the level of Rs 5,785, followed by Rs 6,200, would be seen as the next major resistance for the stock.

On Friday, the stock of Maruti Suzuki India closed at Rs 5,350 per share, surged by 13.88 per cent. The stock had opened at Rs 4,794.45 per share and hit an intraday high of Rs 5,399 and a low of Rs 4,736.20 per share on NSE.