The talk of the town – One 97 Communications Limited (Paytm (NS:)) is again making investors run for cover as the stock hit a 10% lower circuit on Tuesday, closing at INR 380.15. The level of INR 380 is the new record low for the counter and after a short-lived bounce, the stock has again been gripped by bears.
So what should investors do?
If anyone was able to capitalize on the bounce, then sitting on the sidelines is a good strategy as of now. Those who bought around INR 400 levels prior to the bounce but were unable to book profits should have taken a stop loss at the previous all-time of INR 395.
Image Description: Daily chart of One 97 Communications with RSI at the bottom
Image Source: Investing.com
Now, when to buy? Currently, the stock seems to be in a freefall state but the good part is the formation of a bullish divergence on the daily time frame. While the fundamentals are clearly not supporting the bullish view, the divergence is my personal favorite reversal indicator to catch a top or bottom.
However, that does not mean traders should jump the gun and try to catch a falling knife. In the previous buying attempt, there was some sort of buying seen from the bottom. Similarly, here as well, as long as new lows are made every other day, refraining from long positions would be an ideal strategy.
Once some buying pressure is seen, another mean-reversion opportunity can materialize, especially after this bullish divergence.
X (formerly, Twitter) – aayushxkhanna
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