Technical Analysis

Here is what the charts say about the shares of Granules India, Hindalco Industries and Infoedge

Granules India (₹265.65)

Steady downtrend

The stock of Granules India, which is on a downtrend since December 2020, has been falling sharply over the past few weeks. Consequently, it invalidated the support at ₹280 last week, where the 50 per cent Fibonacci retracement of the previous rally coincides. This reinforces the downtrend and the stock will most probably drop more. While ₹220 is the nearest considerable support, a decline to ₹185 cannot be ruled out. But there could be a corrective rally towards ₹280 before the fall.

So, traders can execute shorts in two legs. Short now at around ₹265 and again on a rally to ₹280. Keep the stop-loss at ₹300. When the stock falls below ₹235, tighten the stop-loss to ₹270. Exit 80 per cent your shorts at ₹220 and then move stop-loss further lower to ₹240. Liquidate the remaining shorts at ₹185.

Hindalco Industries (₹443.75)

Declining sharply

The stock of Hindalco Industries has been depreciating sharply since the final week of March after facing the resistance band of ₹620-640. With that, it has now formed an evening star pattern on the monthly chart — a strong indication of a trend reversal. But note that the stock could rise to ₹485 before slipping below ₹410, the nearest available support. That said, given the current momentum, the level of ₹410 is expected to be breached eventually and the scrip could head southwards to ₹365.

Subsequently, there could be a corrective rally. Taking the above factors into account, one can short the stock at current level of ₹443 and add more shorts if it rallies to ₹485. Place stop-loss at ₹515 initially and then alter it to ₹450, if the stock breaches the support at ₹410. Exit the positions fully when the stock declines to ₹365.

Info Edge (India) (₹3,898)

Trend turns bearish

The stock of Info Edge (India), which is on a decline since October last year, breached a key support at ₹4,220 last week. Although not a perfect pattern, the price action resembles a head and shoulder pattern, effectively hinting at a bearish reversal. Thus, the medium-term trend has turned bearish and further depreciation is highly likely. But there is a chance for the scrip to inch up to ₹4,220 before making further lows. So, trading plan should accommodate this possibility.

The bear trend has the potential to drag down the stock to ₹3,110. Considering the above, traders can initiate short worth three-fourth of the intended quantity now — at ₹3,898 and add shorts for the remaining when price rises to ₹4,220. Place stop-loss at ₹4,525 and tighten it to ₹4,000 when price falls below ₹3,500. Exit at ₹3,110.

Published on May 07, 2022