HDFC Asset Management Company forms bearish engulfing candle

The stock of HDFC Asset Management Company Limited has formed a hammer candlestick pattern as on September 25, 2020, and thereafter, marked the sequence of higher tops & higher bottoms. The stock has witnessed over 62 per cent upside momentum from the low of Rs 2,070.05, which was registered on September 25, 2020.  

However, on Friday, the stock had formed a bearish engulfing candlestick pattern on the daily timeframe, which suggests a pause in the uptrend. This pattern is considered to be a bearish reversal pattern and usually occurs at the top of an uptrend.  

The derivatives data is also suggesting a short build-up in the stock. On Friday, January series stock future of HDFC Asset Management Company saw 69,400 addition of open interest, which is a 24.23 per cent addition in the open interest. It indicates that there is a short build-up in the market. January month’s current open interest is 3,55,800. For January expiry, the open interest wise put-call ratio (PCR) is at 0.41.   

Among the momentum indicators, the 14-period daily RSI has cooled off after touching the zone of 80-85 and at present, its reading is 72.86. The RSI is trading below its 9-day average and it is in a falling mode, which indicates a further downside momentum. The fast stochastic line is also trading below its slow stochastic line. Moreover, there has been a negative divergence between the daily stochastic and the stock price movement, which suggests a limited upside.  

Going ahead, if the stock sustains below Friday’s session low of Rs 3,225.05 and trades convincingly below this level, then there is a high probability that Friday’s high point of Rs 3,358.90 may become a temporary top for the stock.  

On Friday, the stock of HDFC Asset Management Company dipped 2.14 per cent and closed at Rs 3,244.40 per share. The stock opened at Rs 3,338 per share and hit an intraday high of Rs 3,358.90 and a low of Rs 3,225.05 per share on NSE.