Jindal Steel & Power forms bearish engulfing candle

The stock of Jindal Steel & Power Limited has witnessed 285 per cent upward momentum from the low of Rs 62, which was registered on April 03, 2020. The stock has relatively outperformed the frontline indices in the current leg of the upward rally. Also, the stock relatively outshined Nifty 500 with a decent margin.

Currently, the stock has formed a bearish engulfing candlestick pattern on the daily timeframe, which suggests that the bears have put the foot in the door. The bearish engulfing candlestick pattern is considered to be a bearish reversal pattern and usually occurs at the top of an uptrend.

Among the momentum indicators, the 14-period daily RSI has cooled-off after touching the extreme overbought zone and at present, its reading is 71.12. The RSI is trading below its 9-day average and it is in a falling mode, which indicates a further downside momentum. The daily stochastic oscillator has also given a bearish crossover in the overbought zone.

Ichimoku chart on the 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 sustains below Friday’s session low of Rs 222.10 and trades convincingly below this level, then there is a high probability that Thursday’s high point of Rs 238.75 may become a temporary top for the stock.

On Friday, the stock of Jindal Steel & Power closed at Rs 223.60 per share, dipped by 4.79 per cent. The stock opened at Rs 236.80 per share and hit an intraday high of Rs 238.40 and a low of Rs 222.10 per share on NSE.