Time to Buy ‘Extremely Oversold’ Adani Enterprises?
All Adani Group companies have been the talk of the town since Hindenburg Research alleged that the group had committed financial fraud. The relentless selling in the group companies is evident by looking at perpetual lower circuits in most of the counters. Some of the stocks have cracked over 50% from their 52-week highs in a matter of few days.
Keeping Hindenburg Research’s report aside, strictly from a technical point of view, these stocks are now extremely oversold. For instance, Adani Enterprises (NS: ADEL ), the largest group company with a market capitalization of INR 2,43,430 crores (as of yesterday) took a mind-boggling hit of 61.77% from the all-time high of INR 4,190 marked in December 2022 to a low of INR 1,601.55, marked today so far, amid a 25% intraday plunge. That’s some crazy level of selling which is rarely seen in a large-cap stock.
Image Description: Daily chart of Adani enterprises with the RSI at the bottom
Image Source: Investing.com
On the technical front, no support levels seem to have worked in the recent past as the stock sliced through all of them like a hot knife through butter. A support level is simply a buying zone wherein buyers are expected to kick in to lap up the company’s shares. As panic-selling is going on with no one actually willing to buy the shares, it's irrelevant to talk about support levels.
So what should be the trading strategy here? The trend is steeply negative without a doubt. However, the RSI (daily, 14) is currently showing a reading of a mere 13! which makes it extremely difficult to go short at the current beaten-down levels. A single sharp bounce would take every short seller for a ride. So, despite a visible downtrend, initiating short positions at these levels is not a piece of cake.
In my opinion, ‘extremely high-risk traders’ can try to go long at these ~INR 1,600 odd levels. The logic is very simple, a very sharp sell-off in an extremely short span of time, and this is a large-cap Nifty 50 stock, in fact, the 20th largest company on the NSE. The risk-to-reward ratio looks quite favorable from here. Also, hedging can be done to further reduce your risk. Even on account of a minor bounce, one could see an easy INR 400 rally to the immediate resistance of INR 2,000. I would reiterate again, this contrary long view should only be played by experienced and extremely high-risk traders. For those still looking to go short, I would still emphasize waiting for a bounce, i.e. for INR 2,000, at least.
The volatility in this counter is unprecedented which is not an ideal playing field for inexperienced traders. There is no view on the long-term investment on any of the group companies until the group clears the air.
Disclosure - I have a position on Adani Enterprises.
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any say about acc??Like 0
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Downtrend.Like
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I also thought it is crazy. But, I had to see the bottom before I committed my money, the intrinsic value was very close to the bottom. Rs1176. It went to 1017. But, I had to see an upward trend, which when it came, I was a little late to recognize it. Maybe not that late, I bought at 1226. 1586 nowLike 1
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there is huge difference between trading and gambling.Like 4
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Aayush ji is psu banks downtrend started? or we should hold pls adviceLike 1
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Hi, the rally in the last half of 2022 seems to be over now.Like 1
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Market is supreme, do what everyone is doing. don't try to create trend with you small amount. just ride the trend.Like 3
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I have been barking since a long time ...this is the kind of advice that makes a middle class person poor in a matter of few hours and he has the audacity to make disclaimer in his article that you will loose your money yet he luring you to go for itLike 5
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Sorry, I didn't hear you barking. Please be louder next time :)Like 8
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I agree with Kunal....Like
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I have seen , corporate is trying to lure influncer to write or talk in favor of enterprise.Like 6
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Why people give such nonsense suggestions, when there r many other good shares and companies in mktLike 4
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Suggestion given by Rajesh is extremely nonsense.Like 3
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I am Waiting for RSI Bullish DivergenceLike 2
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That is a good move.Like
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There is no point in trying, why unnecessary adventure. Talk about the valuation, if you can justify its valuation then only enter otherwise, just wait. There are several companies which is presently trading at 10-20% or even lower from its all time high. Who knows Adani will also become one of them.Like 4
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Despite this fall, aren't these companies richly overvalued? A fall doesn't justify the investment rationale..I presume intelligent investors shall wait for comfortable valuation which is yet to be achievedLike 6
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After reading the disclosure,How is it like watching the position bleed?Like
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@Kartik Pandey You'll be disappointed to know that my max risk is 1.5% of my account size. Still think it would bleed? :)Like
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Catching falling knife. Its heading to 10 rupee stock.Like 1
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ha ha ha. keep dreaming my friend. tomorrow will be last fall for the adani enterprises. see the upside movement from Monday.Like 8
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niceLike 1
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Best support for Adani enterprises is@235, and best buying levels are near 175, if until then it doesn't go bankrupt.Like 7
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Thank you Aayush for your feedback.Like 1
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You're welcome, Elle :)Like
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greatLike 1
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thanks for the word of caution hereLike 1
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Good Analysis same viewsLike 1
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Thanks, Kaushik :)Like
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Thik hai smj gyaLike 1
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haha :DLike
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fair value is below 1kLike 3
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Up ta down broLike 2
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near 1100 it will then buy itLike 1
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Risk hain toh Ishq hain..Adani will bounce back..Indian traders ka yahi scene hain "Bhedchal".. kauwa Kaan le gaya daudo...No body will watch upon their ears.. Imagine if there would have been just two straight session for upper circuit... Malamal weekly returnsLike 2
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Aayush you are absolutely right !!Like
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