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We recommend a sell in the stock of Sobha Developers from a short-term perspective. It is evident from the charts of the stock that after encountering key resistance at Rs 400 in September 2010, the stock changed direction. This trend reversal was triggered by the negative divergence displayed in the daily moving average convergence divergence indicator. Since then, the stock has been on an intermediate-term downtrend. The stock is hovering well below its 50- and 200-day moving averages. The stock conclusively breached its short-term support at Rs 270 during the previous week. Moreover, it declined four per cent with above average volume, breaching its significant support level of Rs 250.
Both the daily and weekly relative strength indices are featuring in the bearish zone. The daily MACD is already hovering in the negative territory and weekly MACD has entered this territory implying downward momentum. Besides, both daily as well as weekly price rate of change indicators are in the negative area indicating selling interest. Our short-term outlook is bearish on the stock. We anticipate its decline to prolong until it touches our price target of Rs 237 or Rs 232 in the days head. Traders can consider selling the stock with stop-loss at Rs 251.
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