Bank of Baroda forms record session count pattern; bulls may take a breather

The stock of Bank of Baroda has given a downward sloping trendline breakout on November 26, 2020, and thereafter, witnessed over 32 per cent upside.

During this northward journey, the stock has marked the sequence of higher highs & higher lows for nine 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 in an extremely overbought region. The relative strength index (RSI) on the daily chart is currently quoting at 85.98 level, which is the highest level since May 2009. The stochastic oscillator on the daily chart has given a bearish crossover in the overbought zone. Further, the negative divergence is clearly visible between the daily stochastic and the stock price movement, which suggests a limited upside.

Going ahead, the 5-day EMA level is likely to act as immediate support for the stock, which is currently quoting at Rs 59.90. In case, the stock sustains below the 5-day EMA level, then it may witness some profit booking.