Investors with a short-term perspective can consider selling

Investors with a short-term perspective can consider selling the stock of Union Bank of India. Since peaking out from its early January peak of Rs 288 (52-week high), the stock has been on an intermediate-term downtrend. Its medium-term trend is also down. Following a short-term uptrend, the stock encountered resistance at Rs 140 in the previous week and started to decline. It is apparent from the daily chart that the stock formed a bearish engulfing candlestick pattern on Friday, which is a short-term bearish reversal pattern.

Confirming this pattern, on Monday, the stock tumbled 9.5 per cent accompanied by above average volume. This decline has also decisively breached its 50-day moving average. The daily relative strength index (RSI) is declining in the neutral region and weekly RSI is featuring in the bearish zone. With this fall, we believe that the stock has resumed its medium-term downtrend, and we are bearish on it from a short-term perspective. We anticipate its downfall to continue and reach our price target of Rs 111 or Rs 109 in the coming trading sessions. Traders with short-term horizon can sell it with stop-loss at Rs 118.5 level.

(Note: The recommendations are based on technical analysis. There is a risk of loss in trading.)

(This article was published on September 23, 2013)
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