Does bearish engulfing on weekly chart of Vedanta suggests trend reversal?

The stock of Vedanta Limited has formed a morning Doji star candlestick pattern in the second week of April 2020 and thereafter, marked the sequence of higher tops & higher bottoms. From the low of Rs 60.20, the stock has gained nearly 467 per cent in 72 weeks.     

However, from the high of Rs 341.45, the stock has lost nearly 21 per cent in just three trading sessions. This resulted in the formation of a bearish engulfing candlestick pattern on the weekly chart, which indicates a pause in the uptrend. The bearish engulfing candlestick pattern is considered to be a bearish reversal pattern, which usually occurs at the top of an uptrend.     

This bearish formation has happened along with robust volume, which implies the urgency of selling. This may result in a decline in price more rapidly.   

Further, the stock has slipped below its 20-day EMA and 50-day EMA level, which is a bearish sign. The 20-day EMA has started edging lower. Further, the 50-day EMA is losing its upward slope and has started to flatten out.   

Talking about the momentum indicators, the leading indicator i.e. the 14-period weekly RSI has given a bearish crossover and also, slipped below the 60 mark for the first time after December 2020. The negative divergence was also spotted at the weekly timeframe on the 14-period RSI. A negative divergence occurs when the price is making a higher high, while the RSI forms a lower high. The daily RSI has slipped below the 40 mark. Moreover, the momentum indicator i.e. the MACD line has crossed under the signal line, which resulted in the histogram turning negative.    

Technically, all the factors are currently aligned in support of the bears. Hence, we would advise the traders to be with a bearish bias. On the downside, the 100-day EMA level is likely to act as immediate support for the stock, which is currently placed at Rs 264.25 level. While on the upside, the 50-day EMA is likely to act as an immediate hurdle for the stock, which is currently quoting at Rs 285 level.