Voltas forms bearish engulfing pattern

The stock of Voltas Limited has given a neckline breakout of Adam & Adam double bottom pattern as on the weekend of June 05, 2020, and thereafter, marked the sequence of higher tops & higher bottoms. The stock has gained nearly 79 per cent from its 52-week lows and gave nearly 16 per cent returns from year-to-date.

However, on Tuesday, the stock has formed a bearish engulfing candlestick pattern on the daily timeframe, which suggests a pause in the uptrend. This pattern is considered to be a bearish reversal pattern and usually occurs at the top of an uptrend.

Among the momentum indicators, the leading indicator i.e. the 14-period daily RSI cooled off after touching the zone of 77.22 and at present, its reading is 66.06. The RSI is on the verge of giving a bearish crossover and it’s in a declining mode, which indicates a further downside momentum. The stochastic oscillator has given a bearish crossover in the overbought region, which suggests a limited upside.

Going ahead, if the stock sustains below Tuesday’s session low of Rs 759.60 and trades convincingly below this level, then there is a high probability that Monday’s high point of Rs 803.90 may become a temporary top for the stock.

On Tuesday, the stock of Voltas dipped by 3.28 per cent and closed at Rs 764.70 per share. The stock opened at Rs 800.95 per share and hit an intraday high of Rs 801 and a low of Rs 759.60 per share on NSE.