Nestle India forms a Double Bottom pattern

The Stock of Nestle India Limited, after registering a high of Rs 15,146.90 in the last week of October, had entered into a corrective phase. On November 20, 2019, the stock had formed a swing low of Rs 13,982.50, where it has formed a Spinning Bottom like candlestick pattern and, thereafter, stock prices rebounded to touch the level of Rs 14,700. However, the stock failed to hold on the higher levels and price attempted 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 on December 09, 2019. This resulted in the formation of Adam and Eve Double Bottom pattern.

On Friday, the stock has given a neckline breakout of the Double bottom pattern. This breakout was confirmed by the above 50-day average volumes. The major trend of the stock is bullish, as it is trading above its weekly pivot and over its long-short term moving averages, that is, 20-day, 50-day, 100-day, and 200-day EMAs, and these moving averages are exactly in an ascending order, suggesting that the trend is strong. The 14-period daily RSI is quoting at 53.35 and it is in rising trajectory, which suggests bullish bias. Interestingly, the daily RSI has also formed Double Bottom pattern. The daily stochastic oscillator is suggesting some bullish strength as well since %K is above the %D.

Going ahead, the stock has immediate support in the zone of Rs 14,325-14,300 as the short term 13-day EMA and 20-day EMA is placed in that region, while the major support is placed in the zone of Rs 14,150-14,000 as it is the confluence of 50-day EMA and the horizontal trendline support. On the higher side, the level of Rs 15,146.90 would be seen as the next resistance zone for the stock.

On Friday, the stock of Nestle India closed at Rs 14,833.20 per share, up by 3.86 per cent. The stock had opened at Rs 14,244 per share and hit an intraday high of Rs 14,979.85 and a low of Rs 14,244 per share on the BSE.