Avanti Feeds forms Bearish Engulfing candle

The stock of Avanti Feeds Limited has formed a Bearish Engulfing candlestick pattern on the daily timeframe. The Bearish Engulfing candlestick pattern consists of two real bodies of opposite colors and the second day’s body pattern completely engulfs the previous one. A large bearish candle suggests that this is a sudden and decisive shift to bearish sentiments.

With this bearish formation, the stock has also managed to close below its weekly pivot. Among the momentum indicators, the leading indicator, 14-period daily RSI, cooled off after touching the 85 zone and its reading is 67.56, at present. The RSI is trading below its 9-day average and it is in a declining mode, which indicates further downside momentum. Interestingly, the daily RSI has formed Adam and Adam double-top pattern, which indicates correction before another northward movement. The fast stochastic is also trading below its slow stochastic line. Moreover, the negative divergence is clearly visible between daily RSI, daily stochastic, and stock price movement, suggesting limited upside.

Going ahead, if the stock sustains below Monday’s session low of Rs. 502 and trades convincingly below this level, then there is a high probability of Monday’s high point of Rs. 571.90 becoming a temporary top for the stock.

On Monday, the stock of Avanti Feeds closed at Rs. 508.30 per share, reporting a decline of 8.11 per cent. The stock opened at Rs. 554.90 per share and hit an intraday high of Rs. 571.90 and a low of Rs. 502 per share on NSE.