Gujarat Gas forms bearish engulfing candle

The stock of Gujarat Gas Limited has given a breakout of downward sloping trendline resistance as on weekend of November 01, 2019 and thereafter, the stock surged sharply up to the level of Rs 307.95. At present, the stock had formed a bearish engulfing candlestick pattern on daily scale, which suggests that bears are taking control. The bearish engulfing candlestick pattern is considered to be a bearish reversal pattern, which usually occurs at the top of an uptrend. 

Among the momentum indicators, the 14-period RSI cooled off after touching 85 zones and at present, its reading is 71.54. RSI is trading below its 9-day average and it is in the falling mode, which indicates a further downside momentum. The fast stochastic is also trading below its slow stochastic line. Moreover, the negative divergence is clearly visible between daily RSI, daily stochastic and the stock price movement, which suggests limited upside.

The Ichimoku chart on 30-minute time frame is clearly giving a negative view as it closed below the KS and TS lines. Another important aspect is that the KS line crossed under the TS line, which is also a bearish sign. 

Going ahead, if the stock slips below Tuesday’s session low of Rs 286 and trades convincingly below this level then, there is a high probability that Tuesday’s high point of Rs 307.95 would become a temporary top for the stock.

On Tuesday, the stock of Gujarat Gas closed at Rs 292.30 per share, dipped by 3.29 per cent. The stock opened at Rs 304.65 per share and hit an intraday high of Rs 307.95 and a low of Rs 286 per share on NSE.