Let’s have a Bear Ride on ITC Ltd.

Currently the markets and the benchmark looks for an impending correction for a near term perspective. Approaching with a top down approach, ITC Ltd. could be a candidate for a large movement on a technical basis.

• The short term moving average (20-EMA) is above the medium term moving average (50-EMA) which suggests a presence of a medium term uptrend in the scrip. But on a three months graph every correction in the counter has taken support at the short term moving average which is currently at 291.

• The ADX indicator is at 51 levels suggesting a very trending nature present in the scrip. However a top up formation of the indicator could seriously inflict the current surge. The +DI is making sideways pattern indicating that no fresh buying at higher levels is occurring. The –DI is continuing its journey towards lower level. The scrip could correct if the –DI bottoms up which would point towards building of fresh short positions.

• The MACD trend indicator is showing a very significant development on the chart. This could be an indicator of a large swing in the prices of the counter in the coming sessions. The MACD line is currently topped out and is on the downward trajectory just above the Signal line. These two lines would generate a strong signal in case of a crossover or bounce back. The MACD histogram has just closed in the positive territory in the last session. The major move may come in case the indicator jumps in to the negative domain.

• The Slow Stochastic momentum indicator is in the overbought zone indicating a momentum on the buying side. However the %K line has crossed the %D line for a lower level on the chart. This could bring some correction in the scrip if both these lines come off their highs in the below 80 levels.

It would be advisable to go short with the trading price in the range of Rs. 309-312 with a strict stop loss of 1% at the price of Rs. 314.5 for a target price in the range of Rs. 293-296.

Akash Singh, Technical Analyst [Akash@hbjcapital.com], HBJ Capital Services Pvt Ltd.