Shipping Corporation of India forms dark cloud cover pattern

The stock of Shipping Corporation of India Limited has given a downward sloping trendline breakout as of November 26, 2020, and thereafter, witnessed a nearly 63 per cent upward move in just 11 trading sessions. However, on Friday, the stock formed a reversal dark cloud cover candlestick pattern, which signals a possible trend reversal.

The dark cloud cover is a bearish reversal candlestick pattern, which usually occurs when a bearish candle on Day 2 closes below the middle of Day 1’s candle. The rejection of the gap-up is a bearish sign in itself but the retracement into the gains of the previous day's upmove adds further bearish sentiment.

Among the momentum indicators, the 14-period daily RSI cooled off after touching the zone of 89-90 and, at present, it is quoting at 79.85. The RSI is on the verge of giving a bearish crossover and it is in a falling mode, which indicates a further downside momentum. The stochastic oscillator is also in the overbought zone.

Moreover, there has been a negative divergence between the daily RSI, daily stochastic, and the stock price movement, which suggests a limited upside.

Going ahead, if the stock sustains below Friday’s session low of Rs 83.45 and trades convincingly below this level then, there is a high probability that Friday’s high point of Rs 89.50 would become a temporary top for the stock.

On Friday, the stock of Shipping Corporation of India dipped 4.98 per cent and closed at Rs 84 per share. The stock opened at Rs 89.50 per share and hit an intraday high of Rs 89.50 and an intraday low of Rs 83.45 per share on NSE.