Larsen & Toubro Infotech forms shooting star pattern; indicates a possible trend reversal
The stock of Larsen & Toubro Infotech Limited has formed a reversal hammer candlestick pattern as of March 20, 2020, and thereafter, marked the sequence of higher tops and higher bottoms. The stock has witnessed over 190 per cent upside momentum from the low of Rs 1,210, which was registered on March 19, 2020. It has given nearly 76 per cent returns from year to date.
However, on a weekly scale, the stock has formed a shooting star candlestick pattern, which suggests a possible trend reversal. The upper shadow of the pattern is nearly 438 points, which is more than three times the body of the candle. The shooting star candlestick formation is viewed as a bearish reversal candlestick pattern, which typically occurs at the top of an uptrend. The long upper shadow of the shooting star implies that the market is being tested to find out where the resistance and supply were located.
The momentum indicators are also supporting the current price structure. The leading indicator i.e. 14-period daily RSI has cooled off after touching the zone of 80-81 and at present, its reading is 63.08. The RSI is trading below its 9-day average and it is in the falling mode, which indicates a further downside momentum. The daily stochastic is also in a falling mode. Moreover, Martin Pring’s long-term KST set up has also given a bearish crossover.
Considering the above observations, if the stock slips below the level of Rs 2,930 and trades convincingly below this level, then there is a high probability that Monday’s high point of Rs 3,512.70 would become a temporary top for the stock.
On Friday, the stock of Larsen & Toubro Infotech Limited closed at Rs 3,075.15 per share, dipped by 6.71 per cent. The stock opened at Rs 3,325 per share and hit an intraday high of Rs 3,364.50 and a low of Rs 3,025.10 per share on NSE.