Laurus Labs forms dark cloud cover pattern

The stock of Laurus Labs Limited has witnessed nearly 292 per cent upward move from the low of March 13, 2020.

The stock has strongly outperformed the frontline indices in the current leg of the upward rally. Also, the stock relatively outshines Nifty 500 with a decent margin. Relative strength comparison with Nifty 500 and Nifty 50 has reached to new heights.

However, on Tuesday, the stock has formed a reversal dark cloud cover candlestick pattern on the daily timeframe. The dark cloud cover is a bearish reversal candlestick pattern, which usually occurs at the top of an uptrend.

Among the momentum indicators, the 14-period daily RSI cooled-off after touching the extreme overbought zones of 90-95, and at present, it is quoting at 78.49. The RSI is trading below its nine-day average and it is in a falling mode, which indicates a further downside momentum. The fast stochastic is also trading below its slow stochastic line. Moreover, there has been a negative divergence between the daily RSI, daily stochastic, and the stock price movement, which suggests a limited upside.

Going ahead, if the stock sustains below Tuesday’s session low of Rs 1,023 and trades convincingly below this level then, there is a high probability that Tuesday’s high point of Rs 1,155.9 would become a temporary top for the stock.

On Tuesday, the stock of Laurus Labs closed at Rs 1,051.45 per share, dipped by 6.53 per cent. The stock opened at Rs 1,145 per share and hit an intraday high of Rs 1,155.9 and a low of Rs 1,023 per share on NSE.