Trump slaps 30% tariffs on EU, Mexico
The past week was very rough on investors around the world. However, on Indian social media, all the talk has been about buying the dip. Today I will look at three stocks that have been taking centre stage as many have been recommending them as an unmissable opportunity.
The first stock am looking at is Asian Paints Ltd. (NS:ASPN). Over the weekend, social media has been flush with every Tom Dick and Harry recommending this as a buy. As usual, I am going to stick my neck out and say that all who buy the equity will be walking into a beautiful trap. This is as I expect most of the new entrants to either get stopped out or become long-term investors by the power of loss.
The reason I do not buy into the fairy-tale that the stock has reached a bottom is due to the weekly and monthly chart patterns. I say this as I agree with the argument that the stock is within a support zone on the daily chart, which is between Rs 2,641 and Rs 2,705. Plus, I also agree that the run-of-the-mill indicators are showing that it is oversold. Thus, owing to all this, there is a probability of the stock having a bounce. But on the other hand, I believe any bounce will be a dead cat bounce. This is as there is a clear resistance zone between Rs 2,900 and Rs 2,960 which will kill any short term up move.
Thus, if the stock were to have a bounce, I will be more interested in shorting the bounce near the resistance levels. This is as in the medium term I expect the stock to break the support zone between Rs 2,641 and Rs 2,705, after which it shall commence its decline towards the support at Rs 2,500. Furthermore, if the support at Rs 2,500 were to break, then the stock will reach the quantitative support zone at Rs 2,380.
The second stock I am looking at is one that has been heavily pitted by many against Asian Paints. It is 2021’s new market entrant Indigo Paints Pvt Ltd (NS:INDG). To say I feel sorry for the investors who bought the equity and held onto it would be an understatement. This is as the stock has fallen from a high of Rs 3,330 to a low of Rs 1,640. This translates to a fall of 50.75%. However, for all those pitting it against Asian Paints, I would request them to wait a tad bit more.
I say this as the stock on Friday broke its candle support zone at Rs 1,677. However, the actual issue comes to light when we look at the stock’s weekly and monthly charts. This is as on the weekly chart, we see absolutely no rejection of the downside from the chart pattern. The stock had formed a Doji candle in the prior week. However, this week the support of the candle has been obliterated with sheer force. Some might say that the equity is oversold in all the timeframes. I agree with that analogy in textbook terms. But what they ought to understand is that when looking at the prior data from a strictly quantitative perspective. We see that the equity has not obeyed the typical levels of being overbought or oversold since its debut on the market. Thus, do not expect it to fall into the textbook level category suddenly.
Hence, owing to all this, if Indigo Paints were to break the support at Rs 1,620, then we can expect an initial fall until Rs 1,500. However, if the support at Rs 1,500 were to falter, then the next major support is at Rs 1,318.
The third stock I am looking at is Berger Paints (NS:BRGR). Out of the three Berger Paints is the only one that seems to have a lower probability of a steady decline. This is as the stock has a sturdy support zone in the weekly time frame and is forming divergence in some of its indicators. If the stock were to hold this zone, then I expect it to form a box range pattern. The support zone for the box range shall be between Rs 620 and Rs 635. Whilst, the resistance zone for the box range pattern will be between Rs 710 and Rs 735. However, if the stock were to break the box range support then the next support is at Rs 560.
Overall, the stocks mentioned above are extremely weak, as they have a downside move left. This is as the equities are still bearish on the technical and quantitative front. Thus, none of them ought to be considered as a buy on a dip in any scenario as of now. You would rather wait for them to show some sort of bullishness after which you ought to consider an entry. Lastly, I have attached a video below analyzing the stocks listed under the Bank Nifty.
Good luck trading.
Disclaimer: The investments discussed by Sandeep Singh Ahluwalia may not be suitable for all investors. Thus, you must trust your analysis and judgment before making investment decisions. The report provided is for informational purposes only and should not be interpreted as a proposition to buy or sell any securities.