Technical Bits: Tata Motors forms Hanging Man pattern

The stock had witnessed a breakout of downward sloping trendline resistance at Rs. 175 on April 1, 2019 and thereafter the stock has seen almost 34 per cent upward move. However, at present, the stock had formed Hanging Man candlestick pattern on a daily time frame.

The Hanging Man candlestick pattern occurs during an uptrend and warns that prices may start falling. The pattern shows that selling interest is starting to increase. The price must move lower on the next candle in order for the Hanging Man to be a valid reversal pattern. This is called confirmation.

Among the momentum indicators, the 14-period RSI is in the overbought zone and currently quoting at 75.34. The fast stochastic is trading below its slow stochastic line, which suggests a pause in the uptrend. Moreover, there has been a bearish divergence between the CCI and stock price movement, which suggests limited upside.

Going ahead, if the stock slips below the Tuesday’s sessions low of 225.65 and trades convincingly below this level, then there is a high probability that Tuesday’s high point of 234.10 would become a temporary top for the stock.

On Tuesday, the stock of Tata Motors Limited closed at Rs. 230.45 per share, dipped by 0.56 per cent. The stock opened at Rs. 233.80 per share and hit an intraday high of Rs. 234.10 and a low of Rs. 225.65 per share on NSE.