Hindustan Unilever forms Three Outside Down pattern

The stock of Hindustan Unilever has formed a Three Outside Down candlestick pattern on the daily timeframe. The Three Outside Down pattern, representing the confirmation of the Bearish Engulfing pattern, can only show the success of the forecast of the appropriate Engulfing pattern.

In the Three Outside Down pattern, the first candle is a small body bullish candle, which closes near its high. The second one is a long body bearish candle,  which completely engulfs the first candle's body and closes near its low, thus, creating a bearish engulfing pattern. The third candle breaks the low of the second candle and closes near its low.

With this bearish formation, the stock has also managed to close below its crucial short term moving average, that is 20-day EMA after a span of almost two months. The leading indicator, 14-period RSI, is currently quoting at 49.87 and has recently given a Bump and Run reversal pattern breakdown. The RSI is trading below its 9-day average and is in a falling mode, which indicates further downside momentum. The fast stochastic is also trading below its slow stochastic line. The daily MACD stays bearish as it is trading below its zero line. Moreover, the negative divergence is clearly visible between daily RSI, daily stochastic, and the stock price movement, which suggests limited upside.

Going ahead, if the stock sustains below Friday's session low of Rs. 2,083 and trades convincingly below this level, then there is a high probability of Thursday’s high point of Rs. 2,190, becoming a temporary top for the stock.

On Friday, the stock of Hindustan Unilever closed at Rs. 2,085 per share, dipped by 2.49 per cent. The stock opened at Rs. 2,135 per share and hit an intraday high of Rs. 2,145.15 and a low of Rs. 2,083 per share on NSE.