Rising Channel Breakdown: This F&O Laggard is Luring Bears!

  • Stock Market Analysis
  • Editors Pick

While bears might be facing trouble in today’s session as most of the stocks are looking to pare their recent losses, some counters are still witnessing selling pressure. One such stock is a well-known home appliance manufacturer - Whirlpool of India Limited (NS: WHIR ), having a market capitalization of INR 16,785 crores.

The stock has taken a decent beating in the last one year, falling 15.7%, compared to Nifty Midcap 100 index’s flat return. After a sharp decline in January 2023, the stock was on its way to recovery and started a retracement phase. It recovered from a low of INR 1,217.25, marked on 3 February 2023, and reached a high of INR 1,375.55 by 9 March 2023. This retracement actually took the form of a rising trend channel.

Image Description: Daily chart of Whirlpool of India with volume bars at the bottom

Image Source: Investing.com

This is a chart pattern that denotes a rising trend, especially when formed over a long time frame. However, this retracement in the form of a counter-trend rally soon got over, as yesterday the stock broke below the lower trendline of this pattern and today a follow-up move materialized despite a green session. The stock is currently down 2.13% to INR 1,294, by 3:02 PM IST and this underperformance is further increasing confidence in the downside potential.

This breakdown is also indicating the resumption of the prior downtrend on a longer time horizon. Traders can look to initiate bearish positions on this counter and the nearest target to which they can eye is INR 1,240 (spot). If the stock rallies back to break the previous swing high of INR 1,368 then short positions should be exited, but a bounce back till INR 1,330 can be used as a good level for short positions.

The volume is not very high, but as the stock was taking a plunge for the last few sessions, the volume has gradually increased which is a good sign for bears. The derivatives data is difficult to decipher due to the illiquidity of this counter. Also, traders need to know that they should not keep on rolling over the contract as 25 May 2023 is the last date for it to be in the derivatives segment of the NSE.

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  • Anand Krishnan @Anand Krishnan
    What is your thoughts on using the Fibonacci series indicator for tracing the price of the stock and the benefit does this indicator have from stock market perspective ?
    Like 1
    • Aayush Khanna @Aayush Khanna
      Hi Anand, I don't use Fibonacci indicators. It is very difficult to prove their reliance statistically.
      Like 0
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