Check out the stocks with ‘hanging man’ pattern that may mean the party is over


by 5paisa Research Team Last Updated: Mar 22, 2022, 10:23 AM IST

The Indian stock market has entered a volatile territory after a sharp slide during the last few weeks after testing a previous peak in January. Even as the spectre of a sharp rise in oil prices due to the Russia-Ukraine war and its likely impact on Indian economy continue to be factors to watch out for, bulls have been trying to slowly push back share prices from what they believe was an oversold zone.

The benchmark indices are just 5% shy of their all-time peak and while many market pundits are seeing a bottom for the slide in prices, few do consider this as a ‘dead cat bounce’ that may give a false comfort level for investors to pump in cash.

Indeed, the results of the state elections that were declared early this month have given some comfort on the hold of the central government. The oil price falling back despite the war in Europe also provides a palliative.

But there are many stocks that are potentially in the overbought zone given their positions on the technical charts.

Investors looking at charts and price and volume patterns have various parameters to decide whether a stock is ripe for the pick or is showing signals of weakness and is best left untouched.

We picked a metric called the ‘hanging man’, a candlestick pattern that is indicative of a bearish reversal pattern which signals that the uptrend is going to end.

It also indicates that the bulls have lost their strength in pushing the stock price up and that bears are back in the market, signalling weakness in further price movement.

Using this metric, we get a handful of large and mid-cap stocks and several small-cap stocks.

Agrochemicals major UPL is the biggest large cap to show signs of the ‘hanging man’ trading pattern. The stock lost nearly a quarter in the selloff since mid-January and then clawed back some of the loss and has climbed by a fifth from the recent lows. But it is now still a tenth behind the peak.

Among other stocks, there are companies like Escorts, Vinati Organics, Redington (India), Cholamandalam Finance and Sapphire Foods that also are in the hanging man stack.

Lower down the ladder, RITES, Cera Sanitaryware, EKI Energy, KSB, Gravita India, PTC and Xpro also figure in the bearish reversal chart.

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