Technical Bits: Siemens forms bearish engulfing candle

The stock of Siemens Limited has been trading in a downward sloping channel since August 2015. The stock had formed bullish engulfing candle as on weekend of November 2018 and thereafter it has marked the series of higher highs and higher lows since the last 36 weeks. However, at present, the stock had formed bearish engulfing candle on the daily scale after touching the upper trendline of the downward sloping channel, which indicates bears are taking control near the short term resistance.

The Bearish Engulfing Candlestick Pattern is considered to be a bearish reversal pattern and usually occurs at the top of an uptrend.

Among the momentum indicators, the 14-period RSI cooled off after touching 70 zone and at present, its reading is 48.40. The RSI is trading below its 9-day average and it is in falling mode, which indicates further downside momentum. The fast stochastic is also trading below its slow stochastic. Moreover, the negative divergence is clearly visible between weekly RSI, weekly stochastic and stock price movement, which suggest limited upside.

In the near term, the 50-day exponential moving average, which is placed around Rs. 1,230, is likely to act as immediate support, while the major support is placed in the zone of Rs. 1,135- 1,114 which is the confluence of upward sloping trendline support and 200-day exponential moving average. Failure to hold this support would lead to further correction up to the level of Rs. 1,043. While on the upside, Friday's high of Rs. 1,367 will be the major hurdle for the stock.

On Friday, the stock of Siemens closed at Rs. 1,262.75 per share, dipped by 6.99 per cent. The stock opened at Rs. 1,360.70 per share and hit an intraday high of Rs. 1,367.05 and a low of Rs. 1,253.45 per share on NSE.