Piramal Enterprises sees Ascending Broadening Wedge pattern breakdown; signals sell

The technical and derivative data of Piramal Enterprises (PEL) indicates that the stock has broken below the lower trendline, prompting analysts to recommend shorting the stock to capitalize on its downward trajectory.

At 10:39 am on December 21, the stock of PEL trades at Rs 863.95 down 21 points or 2.42 percent.

According to Sudeep Shah, Head of Derivatives and Technical Research at SBI Securities, “Piramal Enterprises’ stock hit a low of 885 on November 28, 2023, and since then, it experienced a counter-trend rally. Notably, during this rally, the stock exhibited a Right-Angled Ascending Broadening Wedge pattern. However, on Wednesday, the stock broke below the lower trendline of the Broadening Wedge pattern, signaling a continuation of the bearish trend.”

Technical chart of PEL showing Ascending Broadening Wedge pattern breakdown | Source: SBI Securities

“This breakdown was accompanied by a notable increase in trading volume, further confirming the bearish sentiment. Additionally, on the day of the breakdown, a sizeable bearish candle formed, intensifying the overall bearish outlook for the stock,” Shah added.

Currently, the stock is trading below its short and long-term moving averages. The 20, 50, and 100-day EMA have started edging lower. The daily RSI has slipped below the 40 mark, and it is in a falling mode. According to Shah, the most noteworthy observation is that the RSI has not surpassed the 60 mark since September 2023. The stochastic is also suggesting bearish momentum.

On the derivative front, Shah mentioned that the December series future has dipped by 8.15 percent. The cumulative Open Interest (OI) of the current, next, and far series has decreased by nearly 12.86 percent, indicating overall long unwinding. There is a notable concentration of call open interest at the 950 strike, while significant open interest on the put side is observed at the 850 strike.

Talking about the option chain, Shah said, “From 980 to 840 PE strikes have witnessed a short-covering rally. This indicates bearish sentiment in the derivative space,” said Shah.

According to the measure rule of the Ascending Broadening Wedge pattern, the downside target, as per Shah, is placed at Rs 805 in the short term. He recommends staying with the bearish bias and maintaining the stop loss at Rs 935 level.

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