F&O Stock Shows ‘Bearish Divergence’, Has 10% Downside!

  • Stock Market Analysis

After the broader markets sold off on the first day of the week, the Nifty IT also took a hit, falling 1.17% to INR 37,598.65. This slide makes the IT sector the worst-performing one today. Now, if traders are hunting for some short opportunities, they can have a look at both the technical and fundamental setup.

Image Source: InvestingPro+

On the fundamental front, HCL Technologies (NS: HCLT ) Limited is an IT giant with a market capitalization of INR 4,51,078 crore. After using 13 financial models to calculate the intrinsic value as per each of them, InvestingPro+’s fair value feature depicts a 10% downside from the CMP to INR 1,480. This is the average price of 13 different intrinsic values which negates the extreme targets.

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Image Description: Daily chart of HCL Technologies with RSI at the bottom

Image Source: Investing.com

Now, On the technical front, the share price of HCL Technologies is making a bearish divergence on the daily time frame. This is a trend reversal signal, especially when it forms at the top. Looking closely at the RSI (daily, 14), while the stock was making a higher high, the corresponding RSI failed to replicate the same action and instead started turning lower.

The nearest support if the stock takes a hit is around INR 1,520, which is a good potential INR 130 from the CMP. However, traders can further stretch the eventual booking levels till the stock hits its fair value of INR 1,480.

Fair values are therefore important in deciding the approximate value of the share and when blended with technicals, can reap much rounded and better results.


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