Bajaj Finance forms bearish engulfing candle

The stock had formed bearish engulfing candle on daily scale, which suggests that bears are taking control. 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 75 zone and at present its reading is 62.36. The RSI is trading below its 9-day average and it is in falling mode, which indicates further downside momentum. The fast stochastic line is also trading below the slow stochastic line. Moreover, there has been a negative divergence between the daily stochastic and the stock price movement, which suggests limited upside.

In the near term, the 13-day exponential moving average, which is placed around 2,987.80, is likely to act as an immediate support, while the major support is placed in the zone of 2,940-2,920 which is the confluence of upward sloping trendline support and 20-day exponential moving average. Failure to hold this support would lead to further correction up to the 50-day EMA, which is currently placed at Rs. 2,800. While on the upside, Monday's high of Rs. 3,130 will be the major hurdle for stock.

On Monday, the stock of Bajaj Finance Limited closed at Rs. 3,123 per share, dipped by 2.99 per cent. The stock opened at Rs. 3,123 per share and hit an intraday high of Rs. 3,130 and a low of Rs. 3,018 per share on NSE.