KEC, RBL Bank, Redington: 5 smallcap stocks with warning signs on charts

Among the key momentum oscillators - the MACD and Slow Stochastic are showing negative divergence on these smallcap stocks; hence caution is advised at these counters.

The Nifty SmallCap 250 index is trading at life-time highs, with a vast majority of the stocks trading above the long-term moving averages. So far this year, the Nifty SmallCap index has surged over 26 per cent, and has galloped nearly 192 per cent since 2021.

Several stocks within the smallcap space too are trading at record high levels. However, amid this euphoria there are few smallcap stocks that are flashing signs of caution on the technical charts.

We have handpicked five such stocks - KEC International, Praj Industries, RBL Bank, Redington and Tanla Platforms - wherein the momentum oscillators have shown a negative divergence. Among the key momentum oscillators, the MACD (Moving Average Convergence-Divergence) and the Slow Stochastic have slipped below the signal line on the daily charts.

The MACD help in understanding the price momentum, strength and potential direction changes. In general, momentum oscillators tend to precede a price-action on the stock. Hence, one needs closely track the key support levels, once divergence is noted in the momentum oscillators.

Here's a detailed look at these individual smallcap stocks that may trade with a negative bias going forward:

KEC International

Current Price: Rs 903

Downside Risk: 10.3%

Support: Rs 886

Resistance: Rs 947

The MACD and the Slow Stochastic, both, have given a negative crossover on the KEC daily chart. The stock, however, is currently is testing support around its 20-DMA (Daily Moving Average) at Rs 886. CLICK HERE FOR THE CHART

Given, the negative divergence, the upside for the stock may be capped around Rs 947 levels for now. On the downside, break and sustained trade below the 20-DMA, can trigger a dip towards Rs 835 - Rs 810 levels.

Praj Industries

Current Price: Rs 729

Downside Risk: 12.2%

Support: Rs 700

Resistance: Rs 748; Rs 765

The MACD has turned negative for Praj Industries, while the Slow Stochastic is on the verge of turning negative on the daily scale. Further, the stock has dipped below the higher-end of the Bollinger Bands on the weekly scale.

Given the set-up, the stock is expected to face resistance around Rs 748 - Rs 765 on its way up. On the downside, the stock has near support at Rs 700; below which a fall to Rs 658 - Rs 640 levels seems likely. CLICK HERE FOR THE CHART

RBL Bank

Current Price: Rs 252

Downside Risk: 8.7%

Support: Rs 253; Rs 251

Resistance: Rs 260; Rs 271

Not only are the key momentum oscillators showing negative bias, but the RBL Bank is also seen trading just below its 200-DMA - a key long-term moving average on the daily chart. CLICK HERE FOR THE CHART

The 200-DMA for RBL Bank stock stands at Rs 253.50. Near support for the stock exists at Rs 251 - i.e. the 50-WMA (Weekly Moving Average). Break and sustained trade below the same can trigger a slide towards Rs 230 levels.

In case of a pullback, the 20-DMA at Rs 260 and the super trend line at Rs 271 are likely to act as key hurdles.

Redington

Current Price: Rs 210

Downside Risk: 7.1%

Support: Rs 208; Rs 206

Resistance: Rs 212; Rs 216

At present, Redington stock is seen testing support around its 50-DMA at Rs 208, below which the next key support stands at Rs 206 - the 200-DMA. Given the negative divergence, the stock may break these support levels and test the super trend line support at Rs 200-mark or test Rs 195 on the downside in the near-term. Resistance for the stock is placed at Rs 212 and Rs 216 levels. CLICK HERE FOR THE CHART

Tanla Platforms

Current Price: Rs 952

Downside Risk: 5.3%

Support: Rs 951

Resistance: Rs 971

The MACD and Slow Stochastic are negative for Tanla Platforms on the daily scale. Further, the stock seems to be struggling to hold on to its 20-DMA at Rs 951 levels. On the upside, major resistance for the stock exists at Rs 971 in the form of its 200-DMA. CLICK HERE FOR THE CHART

Break and sustained trade below Rs 952, can lead to fall towards Rs 924 and Rs 918 levels; below which the stock may target its super trend line support at Rs 902.