Chart Check: Down 20% from highs, near-term trend for this chemical stock looks weak. Time to sell?

Tata Chemicals, part of the commodity chemical space, has fallen by about 20% from its October 2022 highs and the technical setup suggests that the momentum is likely to remain weak, and any bounce can be used to go short, suggest experts.

The stock hit a 52-week high of Rs 1,214 on October 11, 2022, but it failed to hold on to the momentum. The stock closed at Rs 969 on February 3, 2023, which translates into a downside of about 20%.

The chemical stock is trading below most of the crucial long-term moving averages and has formed on the weekly charts which is a sign of weakness.


The Supertrend indicator also triggered a sell in December 2022 and since then the stock has failed to breach the 50-WMA on the weekly charts.

In terms of price action, the stock is trading above the 5,10,30, and 50-DMA on the daily charts but below the 100, and 200-DMA.

The Relative Strength Index (RSI) is at 50.2. RSI below 30 is considered oversold and above 70 is considered overbought, Trendlyne data showed. MACD is below its center line, this is a bearish indicator.

The Nifty50 is trading in a broader range of 17,900 to 17,300 levels. But, in the range bound market, some indices like the auto and IT sector are outperforming and energy and chemical sectors are underperforming.

“Within the chemical sectors, Tata Chemicals is showing signs of weakness. The stock had a distribution patch at a higher level followed by a decline. It has intermediate relief rally but terminated at role reversal level around 1000 level, it coincides with Fibonacci retracement resistance at 38.2% level,” Kapil Shah, Technical Analyst, Emkay Global Financial Services Limited and Trainer at FinLearn Academy, said.

“Stock has formed multiple bearish reversal candle-like bearish engulfing patterns and shooting star at the resistance level. It indicates the presence of sellers at the resistance level. Stock is below long-term moving average indicating bearish structure,” he said.

“Based on the aforementioned rationale, the stock offers sell opportunities in the range of Rs 970 to 980 level with a stop loss of Rs 1,010 level,” recommends Shah.

“Downside level for the stock is at the Rs 880 level. It offers a decent risk-to-reward ratio. Time duration will be 1 to 2 months,” he added.

(Disclaimer: Recommendations, suggestions, views and opinions given by experts are their own. These do not represent the views of Economic Times)