Stock Radar: Ramco Cements forms a head and shoulder pattern on the weekly chart; What?

Ramco Cements is down more than 25 percent in one year compared to the 10 percent rise seen in the Nifty 50, and the chart pattern indicates that there may be more pain in the offing.

The stock is on sellers’ radar and has dropped more than 36 percent to Rs 521 on May 10, 2022 from a 52-week high of Rs 1,130 recorded on July 20, 2021.

The steep fall has pushed the stock below the significant short and long term moving averages of 5, 10, 20, 50, 100 and 200-DMA which implies that the bears may be in control.

The stock has created a ‘head and shoulders’ pattern on the weekly chart and is on the verge of a new break below the neckline of the pattern formation.

The ‘head and shoulders’ pattern is seen when the middle peak is significantly higher than the left and right peaks, which are at the same level.

Typically, interfering bottoms occur at the same level. The line connecting these two bottoms is called the ‘neck line’ and the cell signal is generated when the price goes below this neckline. Also read

A break below Rs 700 could further sell pressure which could push the stock to Rs 580 in the next 4-8 weeks, experts suggest. A stop loss can be placed above Rs 785.

On the technical chart, the stock has been trading under pressure since the price fell below Rs 920 in the recent past after a long consolidation period.

“A few weeks ago, the stock broke below its 200-day moving average on the weekly chart, indicating a change in price trend from a medium-term perspective,” said Shitij Gandhi, senior technical analyst at SMC Global Securities.

“Currently the stock has also created a head and shoulder pattern on the weekly chart and is on the verge of a new break below the neckline of pattern formation,” he added.

Above-average volumes with negative deviations on secondary oscillators and price declines indicate that major market participants are in favor of the bear, which indicates a limited rise in prices.

“Immediate support for the stock has been kept at Rs 700, below which we can expect further selling pressure,” Gandhi explained.

(Disclaimer: The recommendations, suggestions, opinions and opinions offered by the experts are their own. These do not represent the views of the Economic Times)