Investors with medium-term perspective can consider selling the stock of HCL Infosystems (Rs 97.2), the hardware and system integration company. After encountering long-term resistance in the band between Rs 180 and Rs 190 in October 2009, the stock started declining. Since then, it has been on a long-term downtrend shaping lower peaks and lower troughs. In September 2010, the stock met with twin resistance (downtrend-line and significant long-term resistance) at Rs 130 and resumed its primary downtrend. While declining it breached it's 21 and 50-day moving averages in mid October and is currently trading well below these lines. The stock plunged 9 per cent last week, decisively breaking through a long-term support around Rs 102. Both daily and weekly relative strength indices are featuring in the bearish zone. The monthly RSI is on the brink of entering in to this region from the neutral region. Moreover, the daily moving average convergence divergence oscillator is steadily declining in line with the stock price and is hovering in the negative territory. The weekly MACD which was hovering in the negative territory since August has also signalled a sell.
We are bearish on the stock from a medium-term perspective. We believe that the stock has the potential to decline further to our medium-term price target of Rs 80, following a minor pause around Rs 89. Investors with medium-term time-horizon can consider selling the stock with stop-loss at Rs 107.
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