The specter of the Hindenburg report continues to haunt Indian equity markets; Markets have seen a sharp sell-off in the last two sessions after the activist short seller made some serious allegations against the Adani group. While Hindenburg Research specializes in “forensic financial research,” they accuse the Adani group of serious financial misconduct, massive stock price manipulation and decades of accounting fraud.
In addition, markets will also be faced with the 2023 Union budget due to be presented on Wednesday 1st February. Volatility is expected to dominate the area and we will see markets generally go in all directions and remain highly volatile through the week ahead.
Amidst this uncertain and volatile environment, some components from the broader markets are showing resilience and some signs of potential bottoming and the possibility of a technical pullback. Such setups would work even better with low-beta stocks, which are less volatile overall. Like this retail stock, which aims to set the stage for a possible technical pullback from current levels.
Trent Ltd (TRENT.IN)
TRENT.IN marked its peak near 1500 in August last year; After a brief consolidation, the stock attempted to clear this level in November. However, after marking an incremental high near 1550, the breakout attempt failed. Not only did the stock break away from the highs below the breakout point, but it also slid further into a corrective decline. Subsequent price action after the failed breakout attempt also led to the formation of a complex Head & Shoulders pattern. The stock subsequently fell and while meeting its downside price measurement target, recently tested the 1150-1160 zone. Overall, the stock has underperformed the broader markets relatively over the past few months.
The recent price action has shown the formation of a strong bullish divergence of the RSI against the price. While price marked lower lows, the RSI did not; This led to the formation of a bullish divergence on the price. Apart from that, the RSI also shows a classic bullish failure swing. The RSI slipped below 30, it recovered but went back down. However, it failed to mark a new low and bounced back above the previous peak, prompting a bullish default swing.
MACD has shown a positive crossover; it is now bullish and trading above the signal line. The stock has also rolled into the improving quadrant; this indicates a likely start of the stock’s relative outperformance phase in the coming days. The stock has rolled into the improving quadrant of the Relative Rotation Graph (RRG). This indicates the possible beginning of a period of relative outperformance for the stock versus the benchmark, which in this case is the broader NIFTY500 index.
If the stock performs a technical pullback, it has the potential to reach 1290 levels. This would result in a potential price increase of 8% to 10% from current levels. Any close below 1110 would refute this view.
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Milan Vaishnav, CMT, MSTA | Consulting Technical Analyst | wwww.EquityResearch.asia | www.ChartWizard.ae
Milan Vaishnav, CMT, MSTA is a capital markets professional with nearly two decades of experience. His area of expertise includes consulting in portfolio/fund management and advisory services. Milan is the founder of ChartWizard FZE (UAE) and Gemstone Equity Research & Advisory Services. As a Consulting Technical Research Analyst and with over 15 years’ experience in the Indian capital markets, he has provided clients with world class India focused independent technical research. He is currently a daily contributor to ET Markets and The Economic Times of India. He is also the author of one of India’s most accurate Daily/Weekly Market Outlooks – a Daily/Weekly Newsletter currently in its 18th year of publication.
