Shriram Transport Finance forms 'Three White Soldiers' pattern

The stock of Shriram Transport Finance Co. Ltd (SRTRANSFIN) has formed a Three White Soldiers pattern on the daily time frame. Three White Soldiers is a bullish candlestick pattern that is used to predict the reversal of the current downtrend in a pricing chart.

The pattern consists of three long candles that trend upwards like a staircase with each opening above the previous days open and preferably at the middle of the previous candle. The pattern helps to confirm that a bear market has ended and market sentiments have turned positive.

With this bullish formation, the stock gave a downward sloping trendline breakout at Rs 1095 that was followed by a pullback of 61.8 per cent Fibonacci retracement level from the prior upward rally. Currently, the stock has been trading above its long and short term moving averages, i.e. 20-day EMA, 50-day EMA, 100-day EMA and 200-day EMA. The daily strength indicator RSI is oscillating in range of 60-43, indicating absence of strength. But momentum oscillator stochastic is scaling up, indicating upside momentum. Moreover, the daily MACD line has crossed above the signal line resulting in the histogram turning positive.

The Ichimoku chart on daily time frame is clearly giving a positive view as it closed above the KS and TS lines. Another important aspect is the KS line has recently crossed above the TS line, which is also a bullish sign.

Going ahead, the stock has strong support in the zone of Rs. 1060-1050, while on the higher side, the short term resistance is placed in the zone of Rs. 1130-1140 level.