Coromandel International trades in broadening formation, right-angle & descending pattern

Considering the daily timeframe, the stock of Coromandel International Limited is trading in a broadening formation, right-angled and descending pattern since the last 40 trading sessions.

The broadening formation, right-angled, and the descending pattern is rare and thus, considered to be a short-term bullish continuation pattern.

This pattern is formed by two diverging lines; the resistance line is horizontal while the support line is downward sloping. The shape of the formation looks like a megaphone. The price climbs until they touch the upper trendline and then, reverse its direction. On the lower side, the price decline making a series of lower lows until they touch the lower trendline. Unlike most consolidation patterns, broadening formation features increasingly wide ranges and greater volatility as the time passes. This pattern reflects indecisiveness among investors and extreme volatility.

The major trend of the stock is bullish as it is trading above its weekly pivot and above its short and long -term moving averages, i.e. 20-day, 50-day, 100-day, and 200-day EMAs and these moving averages are exactly in an ascending order, which suggests that the trend is strong. Among the momentum indicators, the 14-period daily RSI is currently quoting at 58.79 and it is trading above its 9-day average. The daily MACD stays bullish as it is trading above its zero line and signal line. The histogram is suggesting a pickup in the upside momentum.

Going ahead, in any case, the stock sustains and closes above the level of Rs 840. This would result in a breakout of broadening formation. On the lower side, the 20-day EMA is likely to act as immediate support for the stock, which is currently placed at Rs 776.90 level. While the major support is placed in the zone of Rs 762-Rs 750 as it is a confluence of 61.8 per cent Fibonacci retracement level of its prior upward rally (Rs 696-Rs 838.95) and the 50-day EMA level.