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The stock of NTPC has been rallying over the past week. It began the up move at about ₹135 and closed at ₹153.50 on Thursday after marking an intraday high of ₹157.55. However, the extension of the rally is unlikely because ₹155 is a multi-year resistance and on the daily chart, the stock has formed an inverted hammer candlestick pattern, hinting at a reversal. Even if the resistance at ₹155 is to be breached, a corrective decline from here will most probably occur before the breakout of ₹155.
Given the above factors, one can consider initiating fresh intraday short positions. That is, go short at around Thursday’s closing level of ₹153.50 and add more shorts when there is an intraday rally to ₹156. Keep a stop-loss at ₹158. The stock is likely to slip below ₹150 and touch ₹148 on Friday. The 38.2 per cent Fibonacci retracement level of the prior rally lies at around ₹148 and so, there could a bounce after touching this level. So, liquidate the shorts when the scrip falls to ₹148.
(Note: The recommendations are based on technical analysis. There is a risk of loss in trading.)
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