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The outlook for the stock of Cholamandalam Financial Holdings is bearish. The stock has seen a decisive break below the crucial level of ₹640. This confirms a head and shoulder and bearish reversal pattern on the chart. The neck line resistance is at ₹640. Intermediate bounce, if any, can be capped at ₹640. The 21-Day Moving Average (DMA) has crossed well below the 200-DMA. This strengthens the bearish case, and if any intermediate bounce could be short-lived. The stock can fall to ₹540-₹520 initially and then to ₹500-₹490 eventually.
The head and shoulder pattern target comes at ₹490. Also, the 50 per cent Fibonacci retracement support is poised at ₹492. Traders can go short at current levels. Accumulate shorts at ₹630 and keep the stop-loss at ₹655. Trail the stop-loss down to ₹592 as soon as the stock falls to ₹576. Move the stop-loss further down to ₹565 when it touches ₹555 on the downside. Book profits at ₹545. The stock will have to rise past ₹640 decisively to ease the downside pressure and turn bullish. But that looks less likely as seen from the charts.
(Note: The recommendations are based on technical analysis. There is risk of loss in trading.)
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