We recommend a sell in the stock of Reliance Communications from a short-term perspective. It is apparent from the charts of the stock that following a medium-term uptrend from its 52-week low of Rs 46.6 registered in August 2012, the stock encountered significant resistance in the band between Rs 77 and Rs 80 early this week. This resistance zone coincides with 50 per cent fibonacci retracement level of the stock's prior downtrend. After testing the aforesaid resistance zone and triggered by negative divergence in daily relative strength index, the stock is losing its bullish momentum and showing signs of trend reversal.

In the last trading session, the stock fell more than 3 per cent with above average volume forming a bearish engulfing candlestick pattern — a bearish reversal pattern. The stock is reversing downwards from the upper boundary of the daily Bollinger Bands. The daily RSI is declining from the overbought levels.

Taking into consideration that the stock is reversing lower from a key resistance zone and formation of a bearish engulfing candlestick pattern, we take a contrarian stance in the stock from a short-term perspective. We expect it to decline further and reach our price target of Rs 71.5 or 70 in the forthcoming trading sessions. Traders with short-term perspective can consider selling the stock with stop-loss at Rs 76.2 levels.

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