Polycab forms a bearish engulfing pattern

The stock of Polycab India Limited has formed a bearish engulfing candlestick pattern on the weekly time frame. 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, i.e. 13-day EMA and 20-day EMA. The leading indicator, 14-period weekly RSI, is currently quoting at 67.20 and it is trading below its 9-week average. The weekly RSI has formed a double top pattern, which suggests a correction before another northward momentum.

Interestingly, on the daily time frame, the price has made two higher highs in the recent time but most of the indicators, including the RSI, have not reached near the prior highs. The fading momentum is also indicated by the daily MACD histogram which is declining since the last three trading sessions. Moreover, on weekly time scale, the Know Sure Thing (KST) has given a bearish crossover.

Going ahead, the stock has an immediate support in the zone of Rs 1,000-Rs 985, as it is the confluence of an upward sloping trendline support and short-term moving average, i.e. 34-day EMA level. While on the upside, Tuesday’s high of Rs 1,147 will be a major hurdle for the stock.