These penny stocks with ‘hanging man’ pattern may mean the party is over

The Indian stock market has been consolidating after bouncing back from the sharp slide last month. Even though a sharp rise in oil prices after Russia’s invasion of Ukraine remains a worrying factor, bulls have been able to push back the markets to close to the all-time peak.

The benchmark indices are just 3-4% 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.

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 ‘hanging man’, a candlestick pattern that is indicative of a bearish reversal pattern that 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 bears are back in the market, signalling weakness in further price movement.

Using this metric, we get a bunch of penny stocks that meet the criteria. We filtered the penny stocks as companies with a market cap of under Rs 50 crore and stock price below Rs 100 a share.

If we look at stocks from the top to bottom stack in terms of market valuation, we get names like KHFM Hospitality, Kintech Renewables, Royale Manor Hotels, Delton Cables and Acme Resources.

Lower down the order, we have names like Tantia Constructions, HB Estate Developers, Hilton Metal, TCFC Finance, Aditya Spinners, Supreme Infrastructure Medinova Diagnostic, Prima Industries, Steel Strips Infrastructures, Twentyfirst Century Management, Kapashi Commercials and Wall Street Finance.