Investors with a short-term perspective can sell the stock of Federal Bank at current levels. The stock bottomed out from its early September low at Rs 44.2 and started trending upwards. Since then, the stock has been in a medium-term rally. This uptrend accelerated in the month of October with the stock gaining 44 per cent in the same month. However, it encountered a key resistance at around Rs 85 in early November and began to slip.

The stock has formed a bearish engulfing candlestick pattern at this resistance level on the daily as well as the weekly chart, indicating a short-term trend reversal. Further, negative divergence on the daily relative strength index backs the stock’s short-term trend reversal. Volumes on the daily chart are also decreasing. The moving average convergence divergence indicator has signalled a sell and is sloping lower in line with the stock price.

Short-term trend is down for the stock. As the stock has been reversing down from an important resistance, it has potential to extend its decline further. Sell the stock while maintaining a stop-loss at Rs 78.2 levels. Short-term targets are Rs 73 and Rs 71.5.

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

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