IDFC First Bank slips below 200-day SMA, hints at breakdown: Sachin Gupta, Choice Broking

Sachin Gupta, Vice-President for Research at Choice Broking on Monday said IDFC First Bank Ltd witnessed a serious structural breakdown on technical charts and advised traders to avoid any fresh long positions at the prevailing levels. Traders must wait for confirmation of stabilisation, either through base formation near key supports or a strong reversal pattern accompanied by volume expansion, he said.

On Monday, IDFC First Bank opened with a sharp gap-down and immediately hit its lower circuit following the disclosure of a Rs 590 crore fraud at its Chandigarh branch. This event has materially damaged the previously bullish market structure, Gupta said.

"From a technical perspective, the stock has decisively broken below its 50-day and 100-day Simple Moving Averages (SMAs) on heavy sell-side volumes. The intensity of the volume suggests panic-driven distribution rather than routine profit booking," he said.

As per the analyst, the next critical level to watch was the 200-day SMA, placed near Rs 77 level. This level, he said, represented the final major long-term support. That said, the scrip broke below the level intraday and was last quoting 16.05 per cent lower at Rs 70.15.   

"A sustained close below this level (Rs 77) would likely shift the broader trend from a “buy on dips” approach to a “sell on rise” strategy, signaling a structural trend reversal," Gupta said.

While the 14-day RSI is rapidly moving towards oversold territory,  typically a sign of potential exhaustion, caution is warranted. 

In event-driven selloffs, oversold readings can persist and often turn into value traps unless price stability and accumulation signs emerge, Gupta explained.

"The earlier support zone of Rs 81-83 has now turned into a strong supply zone. Any pullback towards this range is likely to face selling pressure unless supported by positive developments or strong institutional buying.

"On the downside, the immediate support is seen around the Rs 65 zone, which aligns with the 61.8 per cent Fibonacci retracement level on the weekly chart. A breakdown below Rs 65 could accelerate the decline toward Rs 60 and potentially Rs 57 levels," Gupta said.