Technical Analysis: Signs of Weakness in Zomato Stock
Zomato’s stock is showing signs of weakness based on multiple technical indicators. Traders may consider selling around ₹206, with a stop loss at ₹240 and a target of ₹172, due to the following reasons:
1. 50-Day EMA is About to Cross Below 200-Day EMA
- The Exponential Moving Average (EMA) crossover is a key bearish indicator.
- The 50-day EMA is nearing a breakdown below the 200-day EMA, a pattern known as a death cross, signaling a shift from an uptrend to a downtrend.
2. 50-Day Moving Average Has Crossed Below 200-Day Moving Average
- This confirms weakening momentum and a bearish outlook.
- A lower short-term moving average below the long-term moving average suggests selling pressure is increasing.
3. Breakdown of Symmetrical Triangle Pattern
- Zomato’s stock price has broken below a symmetrical triangle pattern in the daily chart.
- This pattern breakdown typically leads to further decline as selling pressure intensifies.
4. High Selling Volume
- The recent decline is accompanied by increased selling volume, indicating that institutional investors and traders are reducing their positions.
Fundamental Analysis: Challenges for Zomato
Apart from technical indicators, fundamental factors are also contributing to the stock’s weakness.
1. Antitrust Case Filed Against Zomato
- A retail group has filed an antitrust complaint against Zomato, citing concerns over its discounting practices.
- Regulatory scrutiny could result in fines or operational changes, negatively impacting revenue and investor confidence.
2. Competition and Market Risks
- The food delivery market is highly competitive, with Swiggy and other players challenging Zomato’s market dominance.
- Rising operational costs and thin profit margins remain key concerns for long-term growth.
3. Economic Challenges
- Higher interest rates and reduced consumer spending may impact the food delivery sector.
- A weaker economy could lead to lower demand for online food services.
Conclusion: Bearish Outlook for Zomato Stock
Considering both technical and fundamental factors, Zomato’s stock appears to be in a downtrend. The combination of a bearish moving average crossover, a pattern breakdown, strong selling pressure, and negative news suggests that the stock may decline further.
Trade Setup:
- Sell Level: ₹206
- Stop Loss: ₹240
- Target: ₹172
Investors and traders should monitor Zomato’s stock closely. If selling pressure continues, the stock could face further downside in the near future.
Until then, Happy Trading!
Commodity Samachar Securities
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