Muthoot Finance forms Bearish Engulfing pattern

The stock of Muthoot Finance Limited has formed a Bearish Engulfing candlestick pattern on the weekly timeframe. This pattern is considered to be a bearish reversal pattern and usually occurs at the top of an uptrend.

Along with this bearish formation, the stock has also managed to close below its weekly pivot and short-term moving averages, that is, 8-day EMA and 13-day EMA. Among the momentum indicators, the leading indicator, 14-period daily RSI, cooled off after touching the zone of 75 and, at present, its reading is 57.62.

The RSI is trading below its 9-day average and is in a declining mode, which indicates further downside momentum. The daily MACD stays bearish, as it is trading below its zero line. Moreover, a negative divergence was also spotted at the daily timeframe on the RSI, which indicates a limited upside.

Going ahead, if the stock sustains below Thursday’s session low of Rs 740 and trades convincingly below this level, then there is a high probability of Monday’s high point of Rs 778.95 becoming a temporary top for the stock.