F&O: BIG Bearish Engulfing on this Large-Cap!

  • Stock Market Analysis

Clearly, the day wasn’t a good one for blue-chip companies. The Nifty 50 index fell 0.53% to 18,534.4 as most of the frontline shares lost ground. Shares of Coal India (NS: COAL ) are among such losers that remained on the radar of bears and were pounded hard. The company has almost a monopoly in the coal mining space and has a market capitalization of INR 1,51,664 crores.

The stock had been rising consistently after it marked a multi-month low of INR 207.6 on 27 March 2023. From there, a buying frenzy kicked in that helped the share price to rally to a high of INR 247.9 in today’s session. However, now it seems like the stock is losing its momentum and investors are getting ready to take some profits home.

Image Description: Daily chart of Coal India with volume bars at the bottom

Image Source: Investing.com

The stock made a big bearish engulfing candlestick pattern on the daily chart, at the top-end of the current rally. This is a bearish signal in which the real body of the current day’s candle fully engulfs the real body of the preceding candle. In a classic bearish engulfing, the first candle is bullish (green) and the second one is bearish (red). But I am considering this a valid pattern wherein both candles are red because the current candlestick managed to engulf the real bodies of the preceding two candles, among which the first one is green, which is further setting a strongly bearish tone.

As this price action denotes selling pressure, traders holding long positions might want to take a look at booking some profits or tighten their stops. The volume for the day was recorded at over 15.56 million shares, which is the highest one-day volume in over 2 months. Also, it is over 280% higher than the 10-day average volume of 4 million shares. This increased volume on the selling day indicates that more and more traders are liquidating their holdings. Weak sentiments for the counter can also be attributed to the general weakness in large-cap stocks today.

Now, as the structure is pointing to a correction, traders can eye for a downtrend, for which the nearest target could be INR 228 (spot), giving traders a quick swing opportunity. To manage the risk, a stop should be placed above INR 248 as breaching this high would simply mean the resumption of the uptrend.

Read More: FY23 Wrap: 3 Nifty 50 Cos. with HIGHEST Profit Margins!

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  • Veeresh Capt @Veeresh Capt
    Cant be counted technically bearish since theres an OFS on at 225 institutions subscription and retail tomorrow
    Like 2
  • Prerna 22april @Prerna 22april
    what about Federal bank stock
    Like 0
    There's an offer for sale by goi tomorrow.. maybe informed hands exited early...
    Like 1
  • namami ghosh @namami ghosh
    Like 0
  • Maneesh Kumar @Maneesh Kumar
    Haan bhao ifs ki news k baad tumhara analysis bhi aa gya. wah.
    Like 5

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