F&O: Stock Makes a Dark Cloud Cover, Falls 5%!

One stock from the F&O space that has been falling sharply since the opening tick is Vodafone Idea (NS: VODA ). The stock has rallied quite fast in the recent past, going up from INR 7.5 to today’s high of INR 12.5 in less than a month. That’s a sharp 66% return without any meaningful dip. One of the reasons investors had been accumulating this loss-making telecom company was a rumor that’s been making rounds stating some US company might acquire Vodafone Idea

However, the company straight away denied this news today which led investors to flee from the stock. The mass liquidation led the counter crack over 5% to INR 11.15, by 1:07 PM IST. As the rumor has been proven false, the rally might not stretch further and profit booking in long positions might prove to be a good strategy.

Image Description: Daily chart of Vodafone Idea with volume bars at the bottom

Image Source: Investing.com

But more importantly, the stock has formed a dark cloud cover candlestick pattern on the daily chart which is a bearish reversal signal. Hence, those who still want to hold on for further gains should at least tighten their stops to protect their notional profit.

The high of the rally, i.e. INR 12.5 which is also the 52-week high will likely act as a strong hurdle for the stock. As long as this level is intact, a short-selling opportunity can also be explored. Hedged options strategies such as a bear call spread can also work great with such type of outlook.

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