Firstsource Solutions gives channel breakdown

The stock of Firstsource Solutions Limited was trading in an upward channel since October 2020. However, on Monday, the stock has given a breakdown of the upward sloping trendline of the rising channel, which suggests a correction before another northward journey. This breakdown is confirmed by the above 50-day average volume.   

Additionally, the stock has formed an opening bearish Marubozu candle on the breakdown day. The opening bearish Marubozu candle has no shadow extending from the open price end of the body. The bearish Marubozu candle indicates an extreme bearishness.  

Along with this channel breakdown, the stock, after a span of over five months, has closed below its crucial short-term moving averages i.e. the 50-day EMA. The stock has also managed to close below its weekly pivot.  

Interestingly, the 14-period daily RSI has also given an upward sloping trendline breakdown, which is a bearish sign. Currently, the daily RSI is quoting at 40.05 and it is in a falling mode. The stochastic oscillator is also suggesting some bearish momentum as per cent K is below the per cent D. Moreover, there has been a negative divergence between the daily RSI, daily stochastic and the stock price movement, which suggests a limited upside.  

Going ahead, the zone of Rs 67-Rs 66.50 is likely to act as a support for the stock, and a sustainable move below this zone would invite further selling. On the upside, resistance is seen in the zone of Rs 80-Rs 81 levels.  

On Monday, the stock of Firstsource Solutions Limited closed at Rs 71.90 per share, dipped by 7.11 per cent. The stock opened at Rs 77.80 per share and hit an intraday high of Rs 77.80 and a low of Rs 69.45 per share on NSE.