The Indian markets continue their fall for the third straight session, with the Nifty 50 index tumbling 0.63% to 17,877, by 12:43 PM IST and 39 out of its 50 constituents are trading in the red zone. The sectoral breadth is also poor and all sector-specific indices are giving pain to investors.
Keeping this gloomy session in mind, there are many short opportunities that could be hunted and one such counter that is gearing up to plunge hard is Atul Limited. (NS:ATLP) It is an integrated diversified chemicals company with a market capitalization of INR 23,430 crores.
The ongoing selling spree in the counter can be gauged by the fact that it is the sixth straight session of fall as buying interest keeps abating. Taking cues from the market-wide selling, the stock took a hit of 2.09% to INR 7,774, as of the writing, and has breached long-term support of INR 7,800. This support zone was quite crucial as after the stock crossed this level from the downside in April 2021, it never penetrated below this.
Image Description: Weekly chart of Atul Limited with volume bars at the bottom
Image Source: Investing.com
Although there have been numerous intraday penetrations beneath this demand zone, none of the times the stock was able to close below it. Today, it's looking like the stock would finally close below this level which would call for a very firm downside view, enough to catch the bulls off guard.
More importantly, today is Friday, which means that this breakdown (if it closes below INR 7,800) would also be confirmed on the weekly chart, which is an even bigger trouble for the long-term holders. Talking about the downside potential, it won’t be surprising if the stock delivers a one-way plunge to the next support level of INR 7,000. There are absolutely no demand zones present in between. Obviously, this is not a one or two weeks estimate but might take a few months.
However, the gist of the analysis is if the stock breaks this support on the weekly chart, then holding onto long positions might not prove to be a great idea. Also, as this counter is in the derivatives segment of the NSE, traders can also look for multiple short opportunities on the way down, as per their risk.