The technical setup suggests the stock may experience more selling pressure; therefore, short-term traders may consider selling the stock now with a target of Rs 520, experts suggest.
The life insurer hit a 52-week high of Rs 759 on September 17, 2021 but it failed to keep up its momentum. The stock hit a 52-week low of Rs 497 on March 8, 2022 and rallied again.
However, it is facing resistance closer to its 50-DMA and 200-DMA on the daily chart. The Supertrend indicator gives a sell signal in December 2021.
The stock has recently taken a break from a symmetrical triangle formation on the daily chart, which is a bearish sign.
The symmetrical triangle is generally considered a continuation pattern, but there are cases when it acts as a reversal pattern. A downward breakout after an uptrend should be considered a reversal pattern.
The Relative Strength Index (RSI) is at 39.2. RSI below 30 is considered oversold and above 70 is considered overbought. MACD is above its Center Line, but below the signal line.
“Among the insurance packages, HDFC Life is the weakest stock. It shows strength and weakness. From a technical perspective, the stock is under lower highs and lower lows,” said Kapil Shah, Technical Analyst, Emkay Global Financial Services Educator – FinLearn Academy. .
The long-term move is downward sloping and acts as strong resistance, he said, adding that the stock is forming an M-shaped pattern at resistance. It made a bearish breakout from a symmetrical triangle and that is a sign of bearish continuation, Shah said.
The weekly momentum indicator RSI is reacting from resistance. MACD gave a negative crossover. Based on the above movement, the stock seems to be weaker in the near future.
“This can be seen as a selling opportunity between Rs 560 and Rs 570 with a stop loss of Rs 580 on a closing basis. On the other hand, the stock could drop to Rs 520 in 1 month time,” recommends Shah.
(Disclaimer: The recommendations, suggestions, views and opinions expressed by experts are their own. They do not represent the views of The Economic Times)