Bajaj Finance forms record session count pattern; bulls may take a breather

The stock of Bajaj Finance Limited has witnessed over 31 per cent upside from the low of Rs 3,252.85, which was registered on October 30, 2020.

During this northward journey, the stock has marked the sequence of higher highs & higher lows for eight consecutive trading sessions, which resulted in the formation of a bullish record session count candlestick pattern thereby, further suggesting that the bulls may take a breather.

This is an extremely rare pattern and usually occurs at the top of an uptrend. Generally, we rely on the typical momentum indicators or oscillators for recognising an overbought and oversold condition of the stock. However, this Japanese candlestick pattern gives us a unique way to recognise the time when the momentum is about to wane out.

The momentum indicators and oscillators are also suggesting the same phenomenon. The stochastic oscillator on the daily chart has given a bearish crossover in the overbought zone. The daily RSI is currently quoting at 80.24 and it is in an overbought region. Further, the negative divergence is clearly visible between the daily stochastic and the stock price movement, which suggests a limited upside.

Going ahead, immediate support for the stock is in the zone of Rs 4,000-Rs 3,980 as it is a confluence of 38.2 per cent Fibonacci retracement level of its prior upward move (Rs 3,252.85-Rs 4,429.55) and short-term 5-day EMA level. While on the upside, Rs 4,430-Rs 4,450 will be a major hurdle for the stock.