Technical Bits: IRB forms double bottom pattern

The stock of IRB Infrastructure Developers Limited after registering a high of Rs 169.50 in the month of December 2018 entered into a downtrend and recorded a series of lower high-low. As on weekend of February 22, 2019, the stock had formed a swing low of Rs. 109.30 and formed a bullish candle with long lower shadow like a candle and thereafter, the stock prices rebounded to touch the level of Rs. 160.25. 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 stock registered an almost identical bottom as of the weekend of May 10, 2019. This resulted in the formation of a double-bottom formation.

Additionally, the stock had formed a reversal hammer candlestick pattern on a weekly scale. The hammer Candlestick Pattern is considered to be a bullish reversal pattern and usually occurs at the top of an uptrend. The hammer candlestick indicated a potential price reversal to the upside. The price must start moving up following the hammer.

The 14-period RSI took support at 24 level historically many times and this time also it bounced exactly from the same level. The daily stochastic has also given positive crossover and on Friday, the stock recorded the highest volumes in the recent past.

Going ahead, the stock has strong support in the zone of Rs. 113.85 - Rs. 114.90 as it has an unfilled upside gap which was formed on May 10, 2019. While on the upside, the 20-day EMA is likely to act as immediate resistance, which is currently placed at Rs. 127.55 level.

On Friday, the stock of IRB closed at Rs. 123.05 per share, surged by 8.08 per cent. The stock opened at Rs. 114.90 per share and hit an intraday high of Rs. 124.10 and a low of Rs. 114.90 per share on BSE.