Shriram Transport Finance goes into a bear market on weak fundamentals
- CMP: 1145
- STOPLOSS: 1225
- T1: 1050 and T2: 948
- TIME: 30-60 DAYS
- STRATEGY: SHORT FUTURES
Shriram Transport Finance at around 1145 on 04.07.2018 opened gap down with volumes almost 8 times daily average volumes and had hit an intraday low of 1050 on daily charts. The stock is in a continuous downtrend with heavy selling from all corners as institutions are offloading the shares and stock has breached its key support of 200 DMA. A few days later we shall see its 50 DMA going below 200 DMA which shall bring another round of selling called a death cross in stock. It has been observed that once a stock has death cross it usually falls 20 to 30% from those levels and stock goes into the bear market.
There is deterioration in the fundamentals of stocks and we should not try to catch a falling knife as in stock markets these can be value traps. As a technical analyst, we believe that price and volume action is supreme and we do what we see and don’t try to question MR. Market. When we buy we assume the cost of capital in trade, so if one stock doesn’t deliver anything on upside we assume 8% notional loss in the stock as the cost of capital trade for one year. Often people are resistant to book losses and that’s the hard lesson we learned after many years of hard work.
Also, in these volatile market with a negative bias, we love to find stocks which can go downward spiral as we love shorting in down trending markets because 80% of stocks follow the broader market direction. So, This stock is headed much lower can be a very good money making a machine in next 1 month.