Chambal Fertilisers & Chemicals Ltd forms dark cloud cover pattern

The stock of Chambal Fertilisers & Chemicals Limited has formed a dark cloud cover candlestick pattern on the daily timeframe. The dark cloud cover is a bearish reversal candlestick pattern, which usually occurs when a bearish candle on the second day closes below the middle of the first day’s candle. The rejection of the gap-up is a bearish sign in itself but the retracement into the gains of the previous day's upmove adds even a more bearish sentiment.   

Talking about the momentum indicators, the 14-period daily RSI cooled off after touching the zones of 70-71 and at present, it is quoting at 58.10. The RSI is trading below its nine-day average and it is in a falling mode, which indicates a further downside momentum. The daily stochastic is also on verge of giving a bearish crossover.     

Moreover, there has been a negative divergence between the daily RSI, daily stochastic and the stock price movement, which suggests a limited upside. A negative divergence occurs when the price is making a higher high, while the indicators form a lower high.  

Going ahead, if the stock slips below Friday’s session low of Rs 245.35 and trades convincingly below this level, then there is a high probability that Thursday’s high point of Rs 267 would become a temporary top for the stock.   

On Friday, the stock of Chambal Fertilisers & Chemicals dipped 5.98 per cent and closed at Rs 246.85 per share. The stock opened at Rs 265 per share and hit an intraday high of Rs 265.65 and an intraday low of Rs 245.35 per share on NSE.