The price of pepper witnessed a strong rally from the lows of Rs 27900 levels to register an all
time high of Rs 37190 levels. Since then the price of pepper have been trading in a narrow range. But, the key observation to be made on the chart above is the formation of a bearish Head & shoulder price pattern with a declining neckline support within this trading range. Traders would note that the formation of this pattern is an extremely bearish sign and can lead to severe correction in the future price movements of an index/stock/commodity. The neckline support for the said pattern in placed at the Rs 34800 levels. We believe that the price can correct to its neckline support levels in the near future. Also, a sustained breakdown below this neckline support will lead to an increase in supply pressure and this could open up downside targets of Rs 33800 levels.
Another technical factor that confirms the bearishness depicted by the price action is the sell
signal given by the RSI indicator backed by a negative divergence.
We recommend traders to sell below Rs 35300 levels with a stop loss placed above Rs 35897 levels for downside targets of Rs 34750 / Rs 33800 levels.
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