Technical Analysis

Trading pick of the week: Sell Manappuram Finance

Yoganand D | Updated on August 02, 2020 Published on August 02, 2020

Investors with a medium-term perspective can sell the stock of Manappuram Finance at current levels.

Since the stock took support at ₹75.6 in mid-March this year, it has been on an intermediate-term uptrend.

After completely retracing the previous downtrend, the stock encountered a key resistance in the band between ₹185 and ₹190 last week.

It tumbled 11.7 per cent with good volume in the past week, forming a bearish engulfing candlestick pattern on the weekly chart, which is a bearish reversal pattern.

After meeting with a key resistance in the above-mentioned band last week, the stock began to decline, triggered by negative divergence on the daily price rate of change indicator and the daily moving average convergence divergence. Also, the daily relative strength index (RSI) has started to correct from the overbought territory and now features in the neutral region, with a downward bias.

The weekly RSI has slipped into the neutral region from the bullish zone.

The stock’s recent fall has decisively breached the 21-day moving average. Although the medium-term trend is up, the bearish pattern as well as the weak indicators are a threat to the uptrend.

Taking a contrarian stance, the short- to medium-term outlook is bearish for the stock.

It can continue to trend downwards and reach the price target of ₹144 and then ₹130 over the medium term, with a minor pause at around ₹140.

Traders with a medium-term view can sell the stock with a stop-loss at ₹174.

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Published on August 02, 2020
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