HDFC Bank forms Dark Cloud Cover pattern

The stock had witnessed multiple touch point downward sloping trendline breakout at Rs. 2,150 on March 12, 2019 and thereafter the stock saw almost 7 per cent upward move. At present, the stock had formed Dark Cloud Cover candlestick pattern on the daily scale.

The Dark Cloud Cover is a bearish reversal candlestick pattern, usually occurs when a bearish candle on Day 2 closes below the middle of Day 1’s candle. In addition, price gaps up on Day 2 is only to fill the gap and close significantly into the gains made by Day 1’s bullish candle. The rejection of the gap up is a bearish sign itself, but the retracement into the gains of the previous day's gains adds even more bearish sentiment.

Going ahead, if the stock slips below the Friday’s sessions low of Rs. 2,270.80 and trades convincingly below this level, then there is high probability that Friday’s high point of Rs. 2,307 would become a temporary top for the stock. The 14-period RSI cooled off after touching 79 zone and at present, its reading is 71.99. The stochastic has also given negative crossover in the overbought zone, which suggests a pause in the uptrend. Moreover, there has been a negative divergence between the daily stochastic and the stock price movement, which suggests limited upside.

However, in the near term, the zone of Rs. 2,215- Rs. 2,180 is likely to act as major support as short term 13-day EMA and 20-day EMA is placed in that region.

On Friday, the stock of HDFC Bank Limited closed at Rs. 2,274.85 per share, dipped by 1.06 per cent. The stock opened at Rs. 2,304.20 per share and hit an intraday high of Rs. 2,306.75 and a low of Rs. 2,269.10 per share on BSE.