Technical Analysis

Here is what the charts say about the shares of Aurobindo Pharma, Dixon Technologies and SAIL

Aurobindo Pharma (₹562.55)

Breaches a support

The stock of Aurobindo Pharma saw a quick fall in price in August last year when the price declined from about ₹1,000 to ₹670. Thereafter, there was a slowdown in the sell-off and the stock gradually dropped.

But last week, the stock broke below an important support of ₹600 and the chart hints at further fall from here. But before that, there might be a rally to ₹630, from where it is expected to resume the descent.

Although ₹500 can offer some support, eventually this will be invalidated, and we could see the price drop to ₹420.

Therefore, one can short now and at ₹630. Average sell price will be ₹595. Place stop-loss at ₹665 and tighten it to ₹560 when price dips below ₹500. Exit one-third of the shorts at ₹480 and the remaining at ₹420.

Dixon Technologies (₹3,371.4)

Confirms Head & Shoulder

The stock of Dixon Technologies, which is on a downtrend since the beginning of the year, decisively breached the support at ₹4,000 last week. Thereby it has confirmed a head and shoulder pattern.

This indicates a bearish trend reversal and according to the pattern, the price could fall to ₹2,400. However, it could retest ₹4,000-mark before dropping below ₹3,000. So, traders can short the scrip equally split into three legs — short now at around ₹3,371, then add shorts at ₹3,650 and at ₹4,000 when it moves up.

Thus, the average selling price will be approximately ₹3,675. Keep initial stop-loss at ₹4,200. When price declines below ₹3,180, shift the stop-loss to ₹3,550. Thereafter, liquidate 50 per cent of the shorts when the stock touches ₹2,800 and alter stop-loss to ₹3,075. Exit the remaining half when price falls to ₹2,400.

SAIL (₹79.65)

Lower-low lower-high pattern

The stock of Steel Authority of India (SAIL) is on a steady decline since May 2021 after facing the resistance at ₹150. Since then, it has been forming lower lows and lower highs and it is now below the psychological level of ₹100.

The current price action indicates further fall from here. But there could be a pullback to ₹95 before dropping to ₹60, the nearest notable support. Given these factors, traders can initiate fresh short positions now and add more shorts when the price rallies to ₹95 so that the average sell price will be just above ₹86. Place stop-loss at ₹102 as a rally above ₹100-mark is less likely.

But revise this down to ₹80 when price drops below ₹68. Book profits when price touches ₹60, as there could be a rebound from this level.

Published on May 14, 2022