The markets continued to witness selling pressure on Friday, with the majority of the sectors trading in the red zone. The small and mid-cap stocks that were flying high for the last few months also seem to be giving up and one large-cap counter that is losing its charm is Godrej Consumer Products Limited (NS:GOCP).
It is a well-known FMCG company that owns brands such as Good Night, HIT, etc., having a market capitalization of INR 1,08,196 crores. The stock had been rallying for over a year now and touched its 52-week high of INR 1,074.9 in the previous session. The rally accelerated since the beginning of May 2022, making the stock highly overbought.
Image Description: Daily chart of Godrej Consumer Products with volume bars at the bottom
Image Source: Investing.com
After reaching the top, the stock also started consolidating in a narrow range, depicting volatility contraction. This range was probably a sign of increasing selling pressure which was outstripping the demand for the shares, hence halting the rally. The stock spent roughly 2 weeks in this small consolidation phase which had a resistance of around INR 1,070 and a support of around INR 1,040.
Today, as the market is witnessing selling, Godrej Consumer Products shares cracked below the support and finally gave a trend reversal signal. This breakdown is a sign of bears finally getting the upper hand and the stock seems all set to take a dip. Looking at the brief range at the top, the stock has the potential to fall to the next level of INR 1,010, meaning a further INR 22 potential from the CMP of INR 1,032, by 2:48 PM IST.
As per the trend reversal from the previous sharp rally, there is a slightly higher potential for a fall and the dip might extend to the nearest support of INR 1,000. Hence the price target of the range breakdown and the support on the daily chart are coming at around the same levels, therefore traders looking for short opportunities might want to book their positions around INR 1,010 - INR 1,000.
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