Technically, the term ‘Death Cross’ means that the short-term – the 50-day moving average (DMA) of the particular stock or index has slipped below the long-term 200-DMA, and tends to have negative implications.
The daily charts show that L&T and M&M Finance witnessed the ‘Death Cross’ formation on Thursday, May 14; whereas Hero MotoCorp saw this negative crossover on May 4.
Given this development, here’s a detailed technical outlook on these 3 stocks with ‘Death Cross’ formation by Amol Athawale, VP – Technical Research at Kotak Securities.
Larsen & Toubro (L&T)
Current Market Price: ₹3,936
After a short-term correction, L&T has found support near the 200-DMA and reversed sharply. However, the stock trades below the 20-DMA and has also formed lower highs on the daily charts, which is largely negative, says Amol Athawale of Kotak Securities.
As a trading strategy, the analyst reckons the 200-DMA or ₹3,850 to act as a crucial support zone. Athawale believes that as long as the stock remains above this level, the pullback may continue.
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On the higher side, he expects the bounce back to continue toward ₹4,000-₹4,050 levels. Conversely, the analyst cautions that if the stock falls below ₹3,850, the sentiment could change, and traders may prefer to exit their long positions.
M&M Finance
Current Market Price: ₹318
Despite an over 5 per cent correction so far this week, the short-term texture for M&M Finance is still positive, notes Athawale.
Currently, the stock is trading near the 50- and 200-DMAs, and the short-term outlook indicates a strong possibility of a fresh uptrend rally from the current levels, believes the analyst.
For positional traders, the analyst reckons that the 20-DMA or ₹310 would act as key support zones. Above this, the stock could bounce back to ₹335-₹340. On the flip side, if it falls below ₹310, it could slip to ₹300-₹295.
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Hero MotoCorp
Current Market Price: ₹5,110
Over the past few weeks, the stock has been consistently facing selling pressure at higher levels, highlights the analyst.
“Technically, on daily charts, Hero MotoCorp is forming lower highs and is comfortably trading below short-term and medium-term averages. The short-term outlook for the stock is weak, but a fresh sell-off is only possible if the ₹4,950 support zone is broken,” explains Athawale.
The analyst believes that below ₹4,950, the stock can potentially decline to ₹4,800-₹4,750 levels. On the flip side, if the stock moves above ₹4,950, a pullback could continue toward ₹5,250-₹5,300, he adds.
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