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Investors with a short-term perspective can consider selling the stock of Federal Bank at current levels. Taking support at ₹90 in early May, the stock spiked sharply in a short span of two weeks by gaining 32 per cent. Registering an all-time high of ₹129 on Monday, the stock started to decline forming a bearish engulfing candlestick pattern. This is a bearish reversal pattern implying that the short-term trend could be down.
Both the daily and weekly relative strength indices have started correcting from the overbought levels. Further, the daily moving average convergence divergence indicator is featuring in overbought territory indicating near-term correction. The stock has declined almost 8 per cent so far on profit-taking. We believe this corrective decline is likely to extend in the ensuing trading sessions and reach the price target of ₹112 and then to ₹109.5. Sell the stock while maintaining a stop-loss at ₹119.5.
(Note: The recommendations are based on technical analysis. There is a risk of loss in trading.)
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