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The stock with a market capitalization of over Rs 56,000 crore hit a 52-week high of Rs 1,674 on 22 September 2021, but failed to sustain the momentum. The stock closed at Rs 1,144 which translated into a fall of over 31 per cent.
Technical indicators suggest that a rally could occur after the recent selloff. Experts suggest that traders can consider adding longs with a tight stop loss below Rs 1,100.
Shares of ICICI Lombard have been making lower high and lower low formation since September 2021. It created a ‘death cross’ on the daily charts in December and the stock has been under pressure since then.
A ‘death crossover’ means that the short-term 50-DMA has crossed below its long-term 200-DMA which is a sign of weakness.
The 50-DMA is now acting as a strong resistance. The stock retested this short-term moving average twice in May 2022, but failed to close above it.
The Relative Strength Index or RSI is mid-range and is close to oversold levels. RSI is 37.4, RSI below 30 is considered oversold and above 70 is overbought, trendline data shown.
The Money Flow Index (MFI) uses price and volume data to identify overbought or oversold signals. MFIs below 30 are considered oversold. This means the stock could rebound, the report added.
agenciesOn the price front, the stock is trading below the crucial 10,20,50,100 and 200-DMA while it is trading above the 5-DMA, which is placed at Rs 1122.
The stock price corrected from the 1400 level without any significant downside as it recently declined below Rs 1,100.
“On the daily chart, the stock has declined with a lower top lower bottom formation. Besides, the price declined significantly below the 200DMA. On the weekly chart, it slipped below the previous swing low, indicating weakness,” said Rupak Dey, Senior Technical Analyst
Told.
“However, the stock has moved above its recent consolidation on the daily chart, which indicates a bullish reversal. The daily RSI is showing a bullish crossover and rising,” he said.
Besides, the daily RSI is showing a positive divergence, which suggests a bullish reversal of the price momentum.
“In the short to medium term the price may move towards Rs 1,280-1,300 which is a decent 14 per cent rally at the higher end. At the lower end, support is visible at Rs 1,100 on closing basis. A close below Rs 1,100 may resume the selling pressure.
(Disclaimer: Recommendations, suggestions, views and opinions given by experts are their own. They do not represent the views of The Economic Times)
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