Technical Bits: Bajaj Auto forms Three White Soldiers pattern

The stock of Bajaj Auto Ltd has formed a Three White Soldiers candlestick 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, each should open above the previous days open, ideally in the middle of the previous candle. The pattern helps to confirm that a bear market has ended and market sentiment has turned positive.

On Friday, the stock has managed to close above its weekly pivot and short-term moving average, i.e. 8-day EMA and 13-day EMA. Among the momentum indicators, the 14-period daily RSI is currently quoting at 44.43. The RSI is trading above its 9-day average and it is in rising mode, which indicates further upward momentum. The stochastic oscillator is also suggesting some bullish strength as %K is above the %D. The momentum indicator MACD line has crossed above the signal line, which resulted in the histogram turning positive. Moreover, a positive divergence was also spotted at the daily time frame on the RSI, which indicates limited downside. Positive divergence occurs when the price is making a lower low, while the RSI forms a higher low.

The stock has strong support in the zone of Rs. 2,450- Rs. 2,400 as the horizontal trendline is placed in that region. While on the upside any sustainable move above the level of Rs. 2,625 is likely to open up gates for further rally towards levels of Rs. 2,680, followed by Rs. 2,755.

On Friday, the stock of Bajaj Auto closed at Rs. 2,604 per share, up by 2.49 per cent. The stock opened at Rs. 2,524.90 per share and hit an intraday high of Rs. 2,618 and a low of Rs. 2,479.65 per share on BSE.