Chart Reading: IRCTC respects 20-DMA, but analysts unsure if bottom is in place

NEW DELHI: Shares of IRCTC plunged 17 per cent on Wednesday and 31 per cent overall from Tuesday's record high of Rs 6,393, taking many of its investors by surprise. Technical analysts said the stock was due for some correction after a strong rally, which had pushed it to extreme overbought levels. While some analysts believe the stock can form a bottom at around the 20-day moving average, others expect the weakness may continue on the counter in coming weeks.

The scrip plummeted 17.34 per cent to close at Rs 4,432.95 after NSE banned the stock from trading in its F&O segment. Despite the steep fall, the scrip is still up 207 per cent year-to-date.

Aditya Agarwala, Senior Technical Analyst at YES Securities, said the correction has found initial support at a trendline placed at Rs 4,350, which also happens to be the 20-DMA.

"A sustained trade above Rs 5,000 now could trigger more short covering rallies, which may take the stock back to the levels of Rs 5,500-6,000. On the flip side, if the bears push the stock below this trendline support of Rs 4,350, corrections could accentuate to the levels of Rs 4,000-3,600. Moreover, RSI indicator has also come to previous support zone of sub-60. Therefore, if the bulls protect this support a short covering should be on the cards," Agarwala said.


Mehul Kothari - AVP – Technical Research at Anand Rathi Shares & Stock Brokers said that IRCTC is hovering near its short-term moving average of 20-day EMA and that it has retraced 61.8 per cent of the entire rally, which started from the low of Rs 3,550.

"Thus, we are of the opinion that if the stock closes today near Rs 4,700 mark, a bottom could be in place and we could see higher levels. Overall, a major support is at Rs 4,000 level in case of further selling,” he said.

Book partial profits
Unlike others, independent Analyst Manish Shah, however, believes that IRCTC has sent reversal signals and is advising traders to take some profits off the table. He noted that the decline seen in two sessions is the largest since the leg of the rally began in April.

"In terms of Gann theory, this is price over balance. Price over balance suggests at least a short-term reversal from bullishness to bearishness. Volumes have also seen a sharp spike in the last two days. This also suggests that there has been a significant distribution of the stock in strong hands. MACD line has hooked lower, suggesting loss of momentum and a possible short-term reversal signal," Shah said.

He said the high of Rs 6,396 on Tuesday was a significant top and it is likely to act as a barrier to further upsides.

"Price has also traded below a significant Fib node of 38.2 per cent retracement of the entire rally. If price holds below the support at Rs 4,570 we could see a decline towards Rs 3,926-3,900 where there is congestion, which could push price higher. The top reversal in the price of IRCTC does suggest that there could be some bearish pressure over the next couple of weeks. Investors who are at lower levels could consider booking at least partial profits and wait for better prices to re-enter," he said.