The UPL stock was trading over one percent down in the morning trade on January 18, with technical analysis suggesting that the stock had given a trendline breakdown, indicating sell.
According to Sudeep Shah, Head of Technical and Derivative Research at SBI Securities, "On Wednesday, the stock of UPL has witnessed a breakdown below its upward sloping trendline support. This bearish move was accompanied by trading volume exceeding the 50-day average."
At 10.12 am, UPL was trading at Rs 542.90 on the National Stock Exchange, down 8 points, or 1.47 percent, from the previous close
"Furthermore, the breakdown was accentuated by the formation of a substantial bearish candle, intensifying the overall bearish sentiment," Shah said.
The major trend of stock is bearish, as it is marking the sequence of lower tops and lower bottoms since February 2023. The stock has strongly underperformed the frontline indices in last couple of months.
It is trading below its short and long-term moving averages, Shah said. These averages are in falling mode, which is bearish sign.
From a technical perspective, Shah said momentum indicators and oscillators also supported the bearish chart structure.
"The daily RSI is in super bearish zone as per RSI range shift rules. Particularly noteworthy is the fact that since January 2022, the weekly RSI has been unable to breach the 60 mark, indicating a sustained downward momentum. The daily MACD stays bearish as it is quoting below zero line and signal line. The MACD histogram is suggesting pickup in downside momentum," he said.
On the derivative front, Shah said a short buildup is visible as January future dipped nearly 3 percent and cumulative OI of current, next and far series surged by over 4 percent.
"A significant concentration of call open interest is evident at the 570 strike, while substantial open interest on the put side is concentrated at the 550 strike. Talking about option chain, from 575 to 540 call strikes have witnessed call writing on Wednesday," he said.
These factors indicate bearish momentum. Shah recommends selling the stock in the Rs 555-550 zone with the stop loss of Rs 570. On the downside, it is likely to Rs 520 followed by Rs 500 in the short term.
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