Adani Enterprises ‘Recovers 38%’ Off Lows; Makes ‘Hammer’ Pattern!
Adani Enterprises (NS:) has become the talk of the town. It was the most-searched stock on Investing.com yesterday, out of the entire universe of listed stocks in India. The relentless selling in this flagship company of the Adani Group, along with all other group companies has created widespread panic among investors.
Even after quite a few days amid Hindenburg Reseach’s report (the primary trigger of the ongoing selloff) came out, all entities of the group are hitting lower circuits. The share price of Adani Enterprises fell to a 35% lower circuit in the early session today. However, after a sharp sell-off, some signs of buying are being witnessed in the second half of the session.
After breaking the support of INR 2,000, the stock came crashing down all the way to a low of INR 1,017.45, marked in today’s session, from where it jumped to an intraday high of INR 1,408.65, by 1:20 PM IST, depicting a recovery of around 38% from the low.
Image Description: Daily chart of Adani Enterprises with volume bars at the bottom
Image Source: Investing.com
Yesterday, after the stock breached INR 1,600, I was expecting some reversal on account of a highly oversold reading of around 13 by the RSI. However, that scenario didn’t play out and the stock made a new low today, denoting a very strong trend in continuation. As the daily and weekly charts are clearly showing that the trend is strongly negative, going for a short position might appear lucrative, however, you need to watch out for the unprecedented volatility in the stock which could trigger the stop loss level in the blink of an eye.
A fall of 35% followed by an intraday recovery of 38% from the low is depicting the extreme volatility in the stock. There are no resistance levels till INR 2,000 which makes it even more difficult to identify a logical yet practical level to go short.
On the contrary, as of writing, the stock is making a hammer pattern on the daily chart, which is an early indication of abating supply. A hammer candlestick pattern is a reversal pattern that is known to reverse a prior downtrend to an uptrend. If the stock closes somewhere INR 1,380, then this pattern might give an opportunity to go long.
As the volatility is high, both long and short opportunities can be exploited in the stock, but with very strict risk management. One big wrong trade is enough to blow up a trading account. Inexperienced traders should steer clear from this kind of volatility.
Disclosure – I have a position on Adani Enterprises
