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The stock of Federal Bank has declined 6 per cent this week, decisively breaching its 21- and 50-day moving averages. Investors with a short-term perspective can consider selling the stock at current levels. Significant medium-term resistance around ₹153 has been keeping the stock’s move on check since early November 2014. Last week, the stock tested this resistance level and did a volte-face. Subsequently, the stock started to decline losing its bullish momentum. Moreover, the weekly indicators are displaying negative divergence, backing the stock’s downward reversal. The relative strength index on the daily chart is on the brink of entering the bearish zone from the neutral region.
The short-term outlook is bearish for the Federal Bank stock. It can extend its near-term downtrend and reach our price target of ₹132.5 and ₹130 in the ensuing trading sessions. Sell the stock while maintaining a stop-loss at ₹141.
(Note: The recommendations are based on technical analysis. There is a risk of loss in trading.)
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