Accident of the Day: F&O Stock Nosedives 13% with 4,400% Volume Jump!

The Nifty 50 index continued its losing streak, falling for the 6th consecutive session to 16,870, by 9:54 AM IST. Most of the stocks are seeing steep cuts but one of them that turned out to be a nightmare for investors on Thursday is Samvardhana Motherson International Ltd (NS: SAMD ). It is an auto parts manufacturer with a market capitalization of INR 54,075 crores and trades at a TTM P/E ratio of 56.14.

The stock crashed over 13% to INR 66.3 in today’s session at the opening tick. It was trading in a rising trend channel for the last few months. As can be seen from the chart below, the stock kept on taking support from the lower trendline of the channel and faced resistance whenever it neared the upper trendline. This is a healthy price action as the stock essentially formed a higher low and higher high formation on the daily chart.

Image Description: Daily chart of Samvardhana Motherson International

Image Source: Investing.com

But today’s plunge below the rising trend channel has completely negated the uptrend in the blink of an eye. The volume on today’s liquidation has been an astounding 351 million shares which is over 4,430% higher than the 10-day average volume of 7.75 million shares. And this volume has been clocked in less than an hour of trading!

Clearly, traders should not take this move lightly, especially when the broader markets are also in turmoil. However, one sigh of relief for bulls is, the stock exactly took support from INR 66, which is a strong support level. In December 2023, the stock took support from the same level, hence a bounce back from here could be witnessed. Also, as there is a huge gap being left on the charts, therefore a quick rally can materialize. Hence, aggressive traders can definitely look for very short-term long opportunities.

However, as the bigger trend is now on the negative side, it should be deemed as an opportunity to go short or liquidate long holdings, just like the bounce on Nifty 50 in the first week of March 2023. The next level to which the share price of Samvardhana Motherson International could tank is INR 64. Traders should be cautious in trading this counter on either side due to a sudden spurt in volatility.

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