Technical Bits: PVR forms piercing line pattern

The stock of PVR Ltd has formed a piercing line candlestick pattern on the weekly scale. The piercing line candlestick pattern is considered to be a bullish reversal pattern and usually occurs at the bottom of a downtrend.

The piercing line candlestick pattern is a two-candlestick pattern. The first candle is red, which supports the downtrend and the second candle is a long green candle, which opens below the previous candle and then closes above the midpoint of the preceding red candle. This action causes concern to the bears and a potential bottom has been made.

On Friday, the stock has managed to close above its 20-day and 100-day exponential moving average. The reversal is justified with relatively higher volumes. From the momentum indicators perspective, the 14-period daily RSI is currently quoting at 48.13 and it has recently given positive crossover. The daily stochastic oscillator is also suggesting some bullish strength as %K is above the %D.

Going ahead, the 100-day EMA is likely to act as immediate support which is currently quoting at Rs. 1,654.10 level, While the current week’s low of Rs. 1,565 is likely to act as a major support for the stock. On the higher side, any sustainable move above the level of Rs. 1,690 is likely to open up gates for further rally towards the levels of Rs. 1,735, followed by Rs. 1,760.