Stock that rises 530 per cent from March lows, what should be its next course of action?

The stock of NCC Limited has formed a reversal morning Doji star candlestick pattern as on April 09, 2020 and thereafter, marked the sequence of higher tops & higher bottoms. The stock has witnessed a nearly 530 per cent upside momentum from the low of Rs 15.85, which was registered on March 30, 2020 and has given 46.22 per cent returns from year-to-date.  

However, on the 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 15.55 points, which is more than 15 times of 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. the 14-period daily RSI has cooled-off after touching the zone of 85 and at present, its reading is 62.57. The RSI is trading below its 9-day average and it is in a falling mode, which indicates a further downside momentum. The stochastic is also in a falling mode on both the weekly and the daily chart. Moreover, Martin Pring’s long-term KST set up has also given a bearish crossover.   

Considering the above-mentioned facts, if the stock slips below the level of Rs 83.30 and trades convincingly below this level, then there is a high probability that Tuesday’s high point of Rs 99.85 would become a temporary top for the stock.  

On Friday, the stock of NCC Ltd was closed at Rs 84.30 per share, tumbled by 6.71 per cent. The stock opened at Rs 90 per share and hit an intraday high of Rs 90 and a low of Rs 83.50 per share on NSE.