Watch These Three Stocks for Signs of Weakness

March 17 2021

Sequent Scientific

Sequent Scientific has been an outperforming stock as compared to the broader market over the last one year. It has a strong Relative Strength Rating of 89. The stock is up 261% from a year ago as compared to 71.1% for the Nifty500.

The stock has had a good run in the last 14 weeks post its break out from a 9-week, 19% deep Cup With Handle Base. The stock has gained 34% from the ideal buy point of INR 167.

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.

Sequent Scientific stock fell -4.7% this week, undercutting its 10-week moving average. It closed -3.2% below the 10-week moving average. However, the volume for the week so far remained below its 10-week average and we are still left with three trading sessions for the week.

The long term support line, 40-week moving average is still in uptrend. The stock is trading around 36.4% 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.

Syngene International 

Syngene International has had a huge run in the last one year. It is up more than 123.3% from a year ago as compared to 71.1% for the Nifty500.

On the earnings front, Syngene International has a respectable EPS Rank of 74. The earnings and sales for the stock have grown by 10% and 16%, respectively over the past three years. Its 3-years earnings stability is 6, on a 0 to 99 scale (lower the better). Over the past five years, the earnings and sales for the stock have grown by 11% and 17%, respectively. The 5-years earnings stability is 5. The return on equity for the last reported year is 19%.

Syngene International stock fell -3.2% this week, undercutting its 40-week moving average. It closed -0.3% below the 40-week moving average. However, the volume for the week so far remained below its 10-week average and we are still left with three trading sessions for the week.

The long term trend in the monthly chart is still in uptrend for Syngene International. For a long term leader, the 40-week moving average can act as a support level and it could set up a new base around the line for future moves. But keep in mind that such base building may take months, even years.

At this point, based on your profit cushion, you can either take at least partial profits or watch carefully for signs of further weakness. You can also use the 24-months simple moving average and the long term trend of the RS Line as an ultimate support for a long term leader.

Fact

Fact has been a roaring outperformer as compared to the broader market. It has a top-notch Relative Strength Rating of 94. The stock is up over 110.3% in the last 13 weeks. It is up 293% from a year ago as compared to 51.5% for the Nifty500.

The stock has had a monster run in just 21 weeks post its break out from a 16-week, 25% deep Consolidation Base. The stock has gained 115% from the ideal buy point of INR 55.

Last week, the stock fell -6.8% on a 8% greater volume than the 10-week average. It is not unusual to see a leading stock fall or take a pause in its run. But if a stock is down on heavy volume, the selling is not just a normal reaction. That usually indicates that the run might be coming to an end.

The short term support line, the 10-week moving average is still in uptrend. The current price is extended 24.3% and 92.4% from the 10-week and 40-week moving average, respectively.

Taking everything into consideration, the stock looks a bit extended for the short term. While shares could certainly keep running higher, this is a good time to be taking at least partial profits. If you are sitting on a big enough profit, you can wait for the stock to breach the 10-week line.

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

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