Carborundum, Cipla, and SBI Cards Stocks Are Flashing Signals of Weakness

March 22 2021

Carborundum Universal 

Carborundum Universal has been an outperforming stock as compared to the broader market. It has a strong Relative Strength Rating of 75. The stock is up 108.5% from a year ago as compared to 68.9% for the Nifty500.

The stock has had a monster run post its break out from a 10-week, 21% deep Consolidation Base.  The stock has gained 59% from the ideal buy point of INR 294 in just 19 weeks.

The stock definitely has strong institutional support. It has seen huge institutional accumulation in the most recent quarters. The number of institutional sponsors and shares held by the sponsors, both increased in the last reported quarter.

Carborundum Universal stock fell -6.8% last week, undercutting its 10-week moving average. It closed -1.9% below the 10-week moving average. However, the volume for the week remained below its 10-week average.

The long term support line, 40-week moving average is still in uptrend. The stock is trading around 37.9% above the 40-week moving average.

The leading stocks often take support near its 10-week moving average. But if a stock closes below the line, that should be considered as an early sign of weakness. Closing below the line on a lower volume is okay, but staying there is not. At this point, you can monitor the stock carefully for signs of further weakness.

Cipla 

Cipla has had a huge run in the last one year. It is up more than 93.6% from a year ago as compared to 68.9% for the Nifty500.

The stock definitely has strong institutional support. It has seen huge institutional accumulation in the most recent quarters. The number of institutional sponsors and shares held by the sponsors, both increased in the last reported quarter.

On the earnings front, Cipla has an excellent EPS Rank of 93, which indicates consistency in earnings. The earnings and sales for the stock have grown by 12% and 7%, respectively over the past three years. Its 3-years earnings stability is 8, on a 0 to 99 scale (lower the better). Over the past five years, the earnings and sales for the stock have grown by 10% and 7%, respectively. The 5-years earnings stability is 10. The return on equity for the last reported year is 10%.

Cipla stock fell -5.6% last week, undercutting its 40-week moving average. It closed -0.2% below the 40-week moving average. However, the volume for the week remained below its 10-week average.

The large-cap stocks often take support near its 40-week moving average and set up a new base around the line for future moves. But such base building may take months, even years. If it is a long term leader, we definitely can give it more room and time to stage a recovery. But, that’s not the case here. Cipla does not meet our long term leader’s trend criteria yet. At this point, we would consider this week’s close as a weakness in the stock.

Sbi Cards And Payments

Sbi Cards And Payments stock broke out of a 11-week, 17% deep Consolidation Base 10 weeks ago. However, the stock failed to make meaningful progress.

The stock definitely has strong institutional support. It has seen huge institutional accumulation in the most recent quarters. The number of institutional sponsors and shares held by the sponsors, both increased in the last reported quarter.

Last week, Sbi Cards And Payments stock sliced through the 10-week moving average line. The stock closed -2.3% down on 230% higher volume than 10-week average. The current price is -2.2% below the 10-week moving average.

The long term support line, 40-week moving average is still in uptrend. The stock is trading around 16.2% above the 40-week moving average.

A closing below the 10-week moving average on heavy volume should be considered as a weakness in a stock, at least for the short to intermediate term. At this point, you should step back and look at your profit cushion on the position. If you do not have enough profit, from a risk management standpoint, you may want to cut the position. If you have enough profit, you can take at least partial profits.

What do you think? Please email us any questions or comments.

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