Chart Check: This midcap offers attractive risk-reward post 40% fall from highs; contra buy?

Firstsource Solutions, part of the IT Services industry, has fallen by about 40% from its February 2022 high but recent consolidation at lower levels suggests buying demand near support.

High risk traders can look to buy the stock for a long term target above Rs 200 in the next 5-6 quarters, suggest experts.

The stock hit a 52-week high of Rs 168 on 2nd February 2022 but it failed to hold on to the momentum. The stock bounced back after hitting a low of Rs 93 back in June 2022.

The stock closed at Rs 103 on 27th January 2023 which translates into a fall of about 40% from the 52-week highs.

The stock is hovering near the 50-DMA on the daily charts. A clear breakout above the 200-DMA or 108 levels could fuel further momentum in the stock price. On the weekly charts, the stock is trading above the 200-WMA but below the 50-WMA.

The Relative Strength Index (RSI) is at 47.7. RSI below 30 is considered oversold and above 70 is considered overbought, Trendlyne data showed. MACD is above its center and signal line, this is a bullish indicator.


“Firstsource solution, post its strong first leg of rally from the levels of Rs 20 to 242 in six quarters (31.03.2020-30.09.2021) corrected back to its breakout level of Rs 95 in next 4-5 quarters (31.12.2021-30.12.2022) offering a great buying opportunity,” Sujit Deodhar, Head - Technical Analyst, Wellworth Share & Stock Broking, said.

“It can be observed that post selling from higher levels, the stock has formed two Doji candles in past two quarters indicating selling exhaustion near its major support placed at Rs 95-85 zone which is also the 61.80% retracement of its rise,” he said.

“This makes the charts of FSL a great buy with an attractive risk-reward ratio. On daily charts all its major moving averages have formed a bunch which indicates that a big move is in offing,” highlights Deodhar.

“At current levels of Rs 106 and on any dip in the support zone of Rs 95-85 levels this stock qualifies for a strong buy with a huge upside potential target placed at Rs 225 levels, with holding period of 5-6 quarters and a protective stop loss below Rs 80 levels on daily close basis,” he recommends.

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)