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Investors with a short-term perspective can consider selling the shares of Kaveri Seed Company. The stock plummeted over 9 per cent on Wednesday, reinforcing its broader downtrend. The 21-day moving average at ₹378 has been limiting any upside in the stock since November. Also, the price action since September reflects the formation of a complex head and shoulder pattern, which in this case could act as a continuation pattern.
A head and shoulder pattern generally signals a reversal pattern. The neck line resistance of this pattern is at ₹346. Immediate resistances are in the ₹320-₹323 and ₹327-₹330 zones, which can limit the stock’s upside in the near term. The stock can fall to ₹300. Further break below ₹300 can take it lower to ₹285 or even ₹250 thereafter. Traders with a short-term perspective can go short. Stop-loss can be kept at ₹326 for the target of ₹305.
(Note: The recommendations are based on technical analysis. There is a risk of loss in trading.)
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