These penny stocks and biggies are under ‘dark cloud cover’ on technical charts

by 5paisa Research Team Last Updated: Dec 14, 2022 - 07:44 am 32k Views
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The Indian stock market has been consolidating after a sharp slide a month back followed by a strong bounce back that took the benchmark indices within kissing distance of the all-time high.

Even as the spectre of a sharp rise in oil prices due to the Russia-Ukraine war and likely impact on the Indian economy continues to be a factor to watch out for, bulls have been trying to slowly push back share prices from what they believe was an oversold zone.

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 picking or is showing signals of pest activity that is best left untouched.

We picked a metric called ‘dark cloud cover’, which refers to a candlestick pattern that serves as a bear signal. In simple terms, it means that a persisting uptrend may reverse into an upcoming downtrend.

It tracks a two-day bearish reversal pattern where the stock opens the next day at a new high then closes below the midpoint of the body of the first day.

We ran an exercise to see which stocks are under such a dark cloud cover and could in effect see a downtrend.

In total, there are 20 companies that fit the bill. Of these, nine are penny stocks with market cap under Rs 50 crore and the share price in single or double digits.

The penny stock group has names like Shree Krishna Paper, Kabsons Industries, Arihant Tournesol, MPDL, Unistar Multimedia, Seven Hill Industries, CLIO Infotech, Asya Infosoft and Parker Agrochem.

There are just two companies with a market cap north of $1 billion that meet this criterion: FMCG major Dabur India and Westlife Development, McDonald’s franchise for South and West India.

The other companies are all in the small cap space. These include Hindustan Foods, Greenply Industries, Rohit Ferro-Tech, Hindustan Motors, Manaksia Coated, Innovators Façade, Lancor Holdings, Nivaka Fashions and Gita Renewable.

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