Indraprastha Gas Ltd (IGL), part of the LPG/CNG supplier industry, has fallen more than 20% from its May 2023 highs and chart setup suggests that the weakness is likely to continue.
Short-term traders can look to go short on the stock for a possible target of Rs 325 in the next 3 months, suggest experts.
The stock recorded a Death Cross on daily charts where a long-term moving average (200-DMA) crosses above the short-term moving average (50-DMA) in October. This is a bearish indicator.
The stock hit a 52-week high of Rs 515 on 9th May 2023, but it failed to hold on to the momentum. The stock closed at Rs 394 on 9 November which translates into a fall of over 23%.
If the weakness persists, the stock could well retest March lows above 320 levels in the next couple of months. It is now trading below most of the crucial short- and long-term moving averages on the daily charts.
The stock experienced price rejection twice in the 595 – 605 price range prior to its 2021 decline to 330. The Dead Cat Bounce was created by the stock, which broke down in 515.
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“The drop has been accompanied by higher volumes, which gives the decline more support. When the pattern was created, the Dead Cat Bounce price was increasing, but not the volumes. The weekly and daily RSIs are now less than 40 points,” Suraj Bathija, Founder & CSO at AlgoBulls, said.
“In order to better understand the strength of the trend, we have included ADX, and levels above 20 provide additional support. There is a negative correlation between natural gas prices and IGL stock prices,” he said.
“Since May 2023, natural gas prices have been rising while IGL price is declining. One can sell the stock if holding in the portfolio at a CMP with a target of 325 and a stop-loss of 423 in the coming quarter,” recommended Bathija.
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