Aurobindo Pharma forms Bearish Engulfing pattern

The stock of Aurobindo Pharma Limited has been trading in rising channel since May 2017. The stock had formed bullish engulfing candle on August 09, 2019 and thereafter, the stock gradually surged up to the level of Rs. 639.30. However, recently, the stock formed bearish engulfing candle on the daily scale after touching the 100-day SMA level, which suggests that 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.

On Tuesday, the stock has managed to close below its weekly pivot and short-long term moving averages, i.e. 8-day EMA, 100-day EMA. Among the momentum indicators, the 14-period daily RSI cooled off after reaching 70 zone and currently, its reading is 55.72. 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 line. Moreover, the negative divergence is clearly visible between daily stochastic and stock price movement, which suggests limited upside.

Going ahead, the stock has immediate support in the zone of Rs. 610-Rs. 605 as it is the confluence of upward sloping trendline and short term moving averages, i.e. 20-day EMA (610.10) and 50-day EMA (607). Failure to hold this support would lead to further correction up to the level of Rs. 580, followed by Rs. 536 level. While on the upside, Tuesday’s high of Rs. 639 will be a major hurdle for the stock.

On Tuesday, the stock of Aurobindo Pharma closed at Rs. 615.80 per share, down by 3.27 per cent. The stock opened at Rs. 637 per share and hit an intraday high of Rs. 639 and a low of Rs. 614.50 per share on NSE.