Infibeam Avenues Ltd (NS:IFIB) is one stock that is making headlines since the start of October series. The reason for the limelight is the unexpected and a staggering fall in the stock. On Sept 28, 2018 the stock fell 70% in a day from 220 to 58.45 levels! Since then, the stock has lost approximately 90% of its value. The reason for the fall were the floating rumors that alleged that Infibeam had advanced an interest-free loan to a subsidiary, which has negative net asset. Although, the company gave in clarification, it was not taken in a positive vibe by the market participants.
In this article, I will be throwing light on present technical picture of the stock and trading strategy that can be employed in this stock after the steep fall.
Technical Picture
After a massive intraday fall from 220 levels to 58.45 levels, Infibeam entered into a Price exhaustion zone (represents a scenario wherein after a massive fall in a stock, the stock prices enters into a strong bounce back phase)
Infibeam Daily Chart
Subsequently, a Bullish reversal candlestick pattern, Hammer was formed. The stock gave a strong 50% bounce back from 40 to 78 odd levels in just two sessions. However, the stock was unable to hold itself at higher levels due to surging supply and once again started sliding. The first sign of continuing bearishness was exhibited in a Bearish Engulfing pattern which was formed on 4th October.
Since then the slide has been one way. The selling pressure in the stock is quite evident, the Relative volume indicator, OBV indicates strong selling interest in the counter. The stock is also trading below its 50 day SMA and 20 SMA which further act as major resistance for the counter.
Trading Strategy
Infibeam is still in a SELL mode and there are no signs of bullish reversal. Short term traders must wait for the resistance placed at 20 SMA to be taken out before initiating any long position in the stock.
Fresh shorts however, may be initiated below 32.55 odd levels. If this immediate support is broken, the stock may further decline 25-30% in February-March series.
On a final note, I would like to put forward one point here that not all stocks that fall are worth buying. The famous quote by Warren Buffett - It is wise to be fearful when others are greedy and greedy when others are fearful is often misunderstood by traders and investors, alike. It is not the fall that requires an immediate action. Traders must subjectively know why the fall happened and whether it was speculative or fundamental in nature.
Also, when buying a fall traders must have the ability to judge whether a floor price has been reached to not. Bottom fishing should be done only when charts display a bullish stance because a 50% may easily transform into 95% fall. That has happened in past in many counters like JP Associates, RCOM, PC Jewellers, DHFL , Shilpi cable, to name a few.
The winning strategy is to buy the right stock at the right time at a reasonable price.
Disclaimer- Views presented in the above post are for educational purpose only. Traders must consult their financial advisor before taking any trading/investing decision.