Going Short from the Top? Keep these 3 Stocks on Radar!

  • Stock Market Analysis

On the last day of the week, the broader markets took a heavy beating. From metals to pharma to real estate, every sector (except  IT) has seen investors booking profits amid a continuous rally over the last many weeks. While many sectors have started to show weakness from the very top, aggressive and high-risk traders might be looking for some prominent short opportunities. 

Although, going short from the very top has a risk of getting whipsawed as it's an early entry, however, if proven right, then it also amplifies the reward for this very same reason. Here are three stocks that are at the very top and traders might want to keep them on the radar for the next few weeks. 

State Bank of India 

The Banking sector was the weakest amongst all in today’s session and contributed significantly to today’s broader market weakness. The share price of State Bank Of India (NS: SBI ) has started to correct from the INR 540 - INR 550 range which has proven to be very strong resistance in the past. Even this time, the stock hasn’t been able to surpass this level, despite a massive rally in the banking space in the last two months.   

Daily chart of SBI

Image Description: Daily chart of SBI

Image Source: Investing.com 

It is the third time that SBI shares are correcting from this level. In the previous two instances, the stock easily fell to around INR 440 - INR 445 mark. Currently, the stock is trading at INR 520 after retracing from a high of INR 546.4, and might again be repeating history.

HDFC Limited

Housing Development Finance Corporation Ltd (NS: HDFC ) has also run up quite significantly in the last few weeks. The stock surged from a 52-week low of INR 2,026 in June 2022 to a high of INR 2,507.9 yesterday, depicting a gain of 23.7% in 42 trading sessions, not bad for a mega-cap company! However, during the rally the stock became overbought and the RSI (daily,14) showed a reading of 77.66 yesterday which is the highest reading since January this year. 

Daily chart of HDFC with RSI at the bottom

Image Description: Daily chart of HDFC with RSI at the bottom

Image Source: Investing.com 

Today’s decent cut of 1.2% to INR 2,468.05 has triggered a sell signal by the RSI which fell to 69.5. Also, the stock has deviated from its rising trendline support which has been keeping the stock from falling till now. A retracement to this support would translate into a fall to INR 2,330. However, if this trendline gets breached from the upside, then a complete trend reversal could take place.    

Bharat Electronics Limited 

The last stock on the list is Bharat Electronics Ltd (NS: BAJE ). The stock has been one of the best performers since the Covid-19 pandemic and hasn't corrected much even when the Nifty 50 fell to a 52-week low in June 2022. The stock is in a perfect bull run and is trading around its all-time highs. 

Daily chart of BEL with RSI at the bottom

Image Description: Daily chart of BEL with RSI at the bottom

Image Source: Investing.com 

So why am I bearish on this one? The clear reason is the bearish divergence on the daily chart and that too from the highly overbought zone. Also, there is no prominent support level present till INR 260 (CMP is INR 285.1), hence if a correction comes then there is a decent downside potential from the current levels.  However, as the stock is in a bull run, bearish divergences do not have high accuracy.

 

Disclaimer: None of these stocks are weak, but are showing an early signal of a trend reversal. Also, the above article is not a recommendation to buy/sell/hold any security. 

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  • Avinash Kulkarni @Avinash Kulkarni
    BEL analysis seems to have gone waywards
    Like 1
  • Rajiv Tripathi @Rajiv Tripathi
    Whst is your opinion on larsen & turbo. On the daily time frame, there is a reverse divergence, together with ABDC pattern.
    Like 0
  • MOHAMMED EJAZ @MOHAMMED EJAZ
    fully useful data very nice analyse and thank you so much
    Like 1
  • Prem Ananth @Prem Ananth
    Ayush Khanna, kindly clarify the below statement of this article because i am not able relate and understand the same referencing it to the graph of HDFC seen above this statement in the article. Many Thanks.“Also, the stock has deviated from its rising trendline support which has been keeping the stock from falling till now.”
    Like 0
    • gitesh shah @gitesh shah
      he is saying the stock is too far from the trend line and will come down to it. also there is other support there.
      Like 0
    • ranga sri @ranga sri
      unless and until the Macd crosses below Sig line with RSI below 50, the stock should not be taken in Down trend. It could be only retracement. However, there are many gaps downside with No Logical Pivot support till 2160. For any short, the stop loss as of now to be 2510.
      Like 0
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  • Aditya Purohit @Aditya Purohit
    Correct timing of the analysis Aayush. Been following your articles for quite a while, your timing is really good. Keep up the good work buddy👍🏻
    Like 7
    • Aayush Khanna/Investing.com @Aayush Khanna/Investing.com
      Thanks for the compliment Aditya.
      Like 0
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  • Amit Dutta @Amit Dutta
    So BEL is sell for Monday?
    Like 0
    • kadar supermarket @kadar supermarket
      that is what Lord Ayush is hinting dear kindly oblige
      Like 1
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  • Yakub Dinath @Yakub Dinath
    should we invest in..? intrested in third one!
    Like 0
    • Aditya Purohit @Aditya Purohit
      Go short (sell short) with a buy stop loss in place. Don't risk more than 1% on a single trade.
      Like 0
    • Aditya Purohit @Aditya Purohit
      Go short (sell short) with a buy stop loss in place. Don't risk more than 1% on a single trade.
      Like 0
    • Aditya Purohit @Aditya Purohit
      Go short (sell short) with a buy stop loss in place. Don't risk more than 1% on a single trade.
      Like 0
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  • Yakub Dinath @Yakub Dinath
    should we invest in..? intrested in third one!
    Like 0
  • Thanigachalam Somu @Thanigachalam Somu
    superb observation
    Like 3

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