The technical setup suggests that the stock may see some more selling pressure; hence, short-term traders can look at selling the stock now for a target of Rs 520, suggest experts.
The life insurer hit a 52-week high of Rs 759 on 17 September 2021 but it failed to hold on to the momentum. The stock hit a 52-week low of Rs 497 on 8 March 2022 and bounced back.
However, it is facing resistance closer to its 50-DMA and 200-DMA on the daily charts. The Supertrend indicator gave a sell signal in December 2021.
The stock recently gave a breakdown from the symmetric triangle formation on the daily charts which is a bearish sign.
The symmetrical triangle is commonly considered a continuation pattern, but there are instances when it acts as 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.
“Out of the insurance pack, HDFC Life is the weakest stock. It indicates weak strength. From a technical perspective, the stock is under lower high and lower low sequence,” Kapil Shah, Technical Analyst, Emkay Global Financial Services and Trainer- FinLearn Academy, said.
Long-term moving has a downward slope and acts as a stiff resistance, he said, adding that the stock is forming an M-shaped pattern at the resistance level. It gave a breakout on the downside from a symmetric triangle, and it is a bearish continuation sign, Shah said.
The weekly momentum oscillator RSI is reacting from the resistance level. MACD has given a negative crossover. Based on the above development, the stock looks weak in the coming time.
“It can be considered as a selling opportunity in the range of Rs 560 to 570 with a stop loss of Rs 580 on a closing basis. On the downside, stock can come down to Rs 520 level in the duration of 1 month,” recommends Shah.
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)