REC forms piercing line candlestick pattern

The stock of REC Limited had formed a dark cloud cover candlestick pattern as on the weekend of February 14, 2020, and thereafter, witnessed nearly 50 per cent fall from the high of Rs 156.50 level. After registering a low of Rs 78.75, the stock witnessed a pullback rally. The pullback is halted at the 50 per cent Fibonacci retracement level of its prior downward move (Rs 156.50-Rs 78.75) and coincides with the 50-week EMA level.

The stock had formed a high wave candle as on August 20, 2020, and thereafter, again initiated its southward journey. However, today, the stock formed a piercing line candlestick pattern on the daily timeframe. The piercing line candlestick pattern is considered to be a bullish reversal pattern and usually occurs at the bottom of a downtrend.

From the momentum indicators’ perspective, the 14-period daily RSI is currently quoting at 38.91 and trading above its nine-day average. The stochastic has also given a positive crossover in the oversold region. Both indicators are also supporting the overall price structure.

Interestingly, the stock price has made two lower lows in recent times but most of the indicators, including Relative Strength Index (RSI), have not reached near the prior low of 25.84, which was registered on September 24, 2020. Commodity Channel Index (CCI) has also supported the same phenomenon.

Going ahead, if the stock sustains above Wednesday’s session high of Rs 95.75 and trades convincingly above this level then, there is a high probability that Tuesday’s low of Rs 91.80, may become a temporary bottom for the stock.

On Wednesday, the stock of REC Limited closed at Rs 95.45 per share, surged by 3.08 per cent. The stock opened at Rs 92.40 per share and hit an intraday high of Rs 95.75 and a low of Rs 91.95 per share on NSE.