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We recommend a sell in Tata Elxsi from a short-term perspective. It is evident from the charts of Tata Elxsi that it had been on a medium-term uptrend between March 2008 and June 2008 (from a low of Rs 138 to a high of Rs 223).

However, the stock encountered resistance at around Rs 220, significant resistance level in June and resumed its long-term downtrend. Later on, the stock penetrated its medium-term up trendline by declining and it continues to trend downwards.

On July 22, the stock tumbled more than 6 per cent accompanied with heavy volume, reinforcing the bearish view. The daily and weekly relative strength indexes are featuring in the bearish zone. The moving average convergence and divergence has entered into the negative territory. Moreover, the long-term down trendline is still in place.

We are bearish on the stock in the short-term. We expect the stock’s decline to prolong until it hits our price target of Rs 160 in the short-term. Traders with short-term perspective can sell the stock while maintaining stop-loss at Rs 190.

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