How to trade Zee Entertainment as NCLT places it under insolvency process

Death Cross on the Zee Entertainment may push stock in the bear grip

The National Company Law Appellate Tribunal (NCLAT) on Friday upheld the insolvency proceeding against Zee Entertainment Enterprises in response to an appeal filed by chief executive officer (CEO) Punit Goenka. Shares of Zee Entertainment Enterprises had tumbled to fresh 52-week low on Tuesday; post the NCLT placed the company in the corporate insolvency resolution process.  

Whenever a stock hits a new 52-week low, the momentum suggests that bears are gaining control over the trend. Such stocks are frequently avoided by investor community contemplating more downside ahead.

Meanwhile, the overall stock price performance is not satisfactory since late 2021. It has lost nearly 46 per cent value from the crucial 2021 high of Rs 374.50 and also trades 66 per cent lower from the all-time high of Rs 594 per share.

While the shares of Zee Entertainment Enterprises managed to recoup losses post tumbling over 16 per cent in yesterday’s intraday session; witnessing one of the biggest fall in the recent years, the overall sentiment endured a dent. 

Among media stocks, particularly in derivative segment, Zee Entertainment Enterprises sank the most in the February series. The stock tumbled 12 per cent, while PVR and Sun TV Network fell 5 per cent and 2.40 per cent each. 

Technically, whenever the Zee Entertainment Enterprises share dropped below the zero line of the Moving Average Convergence Divergence (MACD), the share price has seen a gradual fall thereafter and it’s better to stay aside until the indicator does not rise over the line.

In addition, there is a “Death Cross” formation on the daily chart, whose significance reveals a bearish sentiment. The stock may enter a long-term bearishness if it fails to quickly rebound and hold ground over the 200-day moving average (DMA), presently positioned at Rs 241.

The weekly chart shows that the counter is unable to sustain over the 200-weekly moving average, currently placed at Rs 242.50. This sends a negative outlook that may further dampen if the stock fails to hold the sell-off. 

Monthly chart also advocates softness if the stock stays beneath Rs 200. In such a scenario, the stock may fall to Rs 160 levels. The Relative Strength Index (RSI) is fragile, and if continues to trade below 45 value, the strength may not point to any reversal. The candlestick pattern, which has engulfed all the positive rallies in fewer candles, reveals more of a bearish hold. CLICK HERE FOR THE CHART