Tata Tea

We recommend a sell on Tata Tea from a short-term trading perspective. It is evident from the charts of Tata Tea that it had been on a medium-term uptrend between late November 2008 and mid January 2009 when it moved from Rs 430 to Rs 635. The stock almost gained 47 per cent during this period. This up move of the stock retraced exactly 38.2 per cent (fibonacci retracement level) of its prior downtrend.

The stock has a significant long-term resistance between Rs 635 and Rs 650. It encountered resistance at Rs 635, and lost its bullish momentum. Subsequently the stock breached its medium-term up trendline and 21-day moving average. The daily relative strength index (RSI) is falling in the neutral region towards the bearish zone.

Moreover, the price rate of change indicator has entered in to the negative territory that indicates increase in selling pressure. We are bearish on the stock from a short-term horizon. We expect the stock to decline further until it hits our price target of Rs 534. Traders with short-term perspective can sell the stock while maintaining a stop-loss at Rs 618.