[Premium] Weakness Spreading To Large-Caps
The first stock on our list is UPL Limited, which is now completing a multi-year rounding top pattern by breaking support near 680. As long as prices are below 686.50, this stock looks vulnerable to test 556, at which point we'll reevaluate.
Bharti Airtel Ltd. broke out to new highs late last year and failed to maintain those higher prices, confirming a failed breakout and trending lower ever since. Prices are once again breaking support, suggesting that if prices are below 375 it's likely to test its 2016 lows near 283.
Bharti Infratel Ltd. is another name completing a multi-year topping pattern by breaking support near 281. As long as prices are below that level, our first price target is near 212 and our secondary price target and measured move of its topping pattern is down near 180.
Grasim Industries Ltd. is another name that was digesting gains in a wide-ranged consolidation and is now resolving to the downside. If prices are below 1,025, our next downside price target is near 877.
Ultratech Cement broke below support near 3,825, confirming the rounding top pattern that's formed over the last year. As long as prices are below that level, our first downside price target is 3,350.
NTPC Ltd. has been range-bound for the last 1.5 years and is now resolving to the downside. As long as prices are below 157.50, the stock looks vulnerable to further downside toward 138.
Oil & Natural Gas Corp. Ltd. is resolving its range to the downside by breaking the uptrend line from its 2016 lows. As long as prices are below 175, prices look vulnerable to retest those 2016 lows near 125.50.
Tata Steel Ltd. is another name that was consolidating its strong gains from 2016-2017 in a wide-ranged consolidation, but it's spent most of the last three months retesting the lower end of this range. This suggests that sellers are gaining control here and that a break of support at 534 would trigger further downside to potential support levels near 466 and 402.
The last name on our list is Vedanta Ltd., which broke support near 242.50 to confirm its rounding top pattern. As long as prices are below that level, the stock looks vulnerable to further downside toward 172.
The Bottom Line: From our analysis of these nine stocks on the short side, we can see weakness in sectors like Energy, Metals, Telecom, Cement & Cement Products, and Fertilisers & Pesticides. While all of these (with the exception of Energy) are smaller components of the cap-weighted Nifty 50 and Nifty 500, it's still worth paying attention to. Even in strong sectors like Financial Services, Information Technology, and Consumer Goods we are seeing failed breakouts and stocks coming under selling pressure. While we originally thought that mid and small-caps would play "catch-up" to the large-caps which were showing relative strength, it's looking more and more likely that large-caps may "catch-down" and start to struggle as well.
In this type of environment where many of our upside price targets have been met and we're seeing more and more downtrends emerge, we want to continue to be selective on the long side and also taking advantage of opportunities on the short side in some of the weakest sectors. The names above are a good start in doing so as our risk is very well-defined and the reward/risk is skewed in our favor.
For a more in depth analysis of the large-cap Nifty 50 and Nifty Next 50, please visit the updated chartbook page.
Thank you for reading and please let us know if you have any questions.
Allstarcharts Team