We recommend a sell in the stock of Indian Overseas Bank from a short-term perspective. It is apparent from the charts of the stock that ever since peaking out in November 2010 peak of Rs 176, the stock has been in a long-term downtrend. Medium-term trend has been down from its January 2013 high of Rs 94. Following a corrective up move, the stock encountered key resistance at around Rs 75 recently and started to decline. Strengthening the stock’s downtrend, it fell almost 3 per cent with above average volume on Wednesday.
The stock is trading way below its 50 and 200-day moving averages. The daily as well as weekly relative strength indices have re-entered the bearish zone from the neutral region indicating downward momentum. Likewise, price rate of change indicators are hovering in the negative terrain implying selling interest. Medium-term downtrend is intact and the stock has resumed this trend.
We are bearish on the stock from a short-term perceptive. We expect its decline to prolong and reach our price target of Rs 68.4 or Rs 67 in the forthcoming trading sessions. Traders with short-term perspective can consider selling the stock with stop-loss at Rs 72.7 levels.