Aurobindo Pharma (INR 562.55)
Breaks a support
The stock of Aurobindo Pharma experienced a rapid price decline in August last year as the price dropped from around INR 1,000 to INR 670. Thereafter, there was a slowdown in divestments and the stock gradually declined.
But last week the stock broke below a significant support of 600 INR and the chart suggests further decline from here. But before that, there may be a rally to 630 INR, from which it is expected to resume the descent.
Although 500 INR may offer some support, this will eventually become invalid and we could see the price drop to 420 INR.
Therefore one can short now and to 630 INR. The average selling price will be 595 INR. Place the stop-loss at 665 INR, and tighten it to 560 INR when the price drops below 500 INR. Finish one third of the shorts at 480 INR and the remaining at 420 INR.
Dixon Technologies (INR 3,371.4)
Confirms head and shoulder
The stock of Dixon Technologies, which has been on a downward trend since the beginning of the year, decisively broke support to 4,000 last week. Thereby, it has confirmed a head and shoulder pattern.
This indicates a bearish trend reversal, and according to the pattern, the price may fall to 2,400 INR. However, it could try 4,000 INR again before falling below 3,000 INR. So traders can short the script evenly into three legs – short now to around 3,371 INR, and then add shorts to 3,650 INR and at 4,000 INR when it moves up.
Thus, the average selling price will be approximately 3,675 INR. Keep the first stop-loss at 4,200 INR. When the price falls below INR 3,180, move the stop-loss to INR 3,550. Then liquidate 50 percent of the shorts when the stock reaches INR 2,800, and change the stop-loss to INR 3,075. Leave the remaining half when the price drops to INR 2,400.
SAIL (79.65 INR)
Lower-low lower-high pattern
The stock of the Steel Authority of India (SAIL) is on a steady decline since May 2021 after meeting resistance of ₹ 150. Since then, it has formed lower lows and lower elevations, and it is now below the psychological level of 100 INR.
The current price action indicates further decline from here. But there may be a retreat to 95 INR before it drops to 60 INR, the closest notable support. Given these factors, traders can start new short positions now and add more shorts when the price rises to 95 INR so that the average selling price will be just above 86 INR. Place stop-loss at 102 INR, as a rally above 100 INR is less likely.
But revise this down to 80 INR when the price drops below 68 INR. Order profit when the price touches INR 60, as there may be a setback from this level.
May 14, 2022