Rites exhibits Bearish Engulfing candlestick pattern

The stock of Rites Limited has formed Bearish Engulfing candlestick pattern on daily time frame. The Bearish Engulfing Candlestick Pattern is considered to be a bearish reversal pattern and usually occurs at the top of an uptrend.

With this bearish formation, the stock has also managed to close below its weekly pivot. Among the momentum indicators, the leading indicator 14-period daily RSI cooled off after touching 75 zone and at present, its reading is 59.89. The RSI is trading below its 9-day average and it is in a falling mode, which indicates further downside momentum. The daily MACD stays bearish as it is trading below its zero line. The MACD line has recently crossed under the signal line, which resulted in the histogram turning negative. Moreover, the negative divergence is clearly visible between daily RSI, daily stochastic and stock price movement, which suggests limited upside.

In the near term, the 20-day exponential moving average, which is placed around Rs. 258.35, is likely to act as immediate support, while the major support is placed in the zone of Rs.251-Rs. 250 which is the confluence of upward sloping trendline support and 34-day exponential moving average. Failure to hold this support would lead to further correction up to the level of Rs. 240, followed by Rs. 230. While on the upside, Friday's high of Rs. 295.40 will be the major hurdle for the stock.

On Monday, the stock of Rites Limited closed at Rs. 267.50 per share, down by 5.49 per cent. The stock had opened at Rs. 284.00 per share and hit an intraday high of Rs. 286.45 and a low of Rs. 266.00 per share on NSE.