A 'Death Cross' pattern has formed in ICICI Bank and M&M stocks, signaling a potential downturn. However, historical data suggests these stocks have defied this pattern in the past, delivering positive returns.
While major benchmark indices are showing signs of recovery, two prominent Nifty-50 stocks – ICICI Bank and Mahindra & Mahindra (M&M) – have displayed a technically significant 'Death Cross' pattern. This is a crucial indicator for investors, as a 'Death Cross' is generally considered a bearish signal, suggesting a potential decline in the stock price.
What is a 'Death Cross'?
A 'Death Cross' occurs when a stock's 50-day moving average (50-DMA) falls below its 200-day moving average (200-DMA). This is considered a bearish signal, increasing the likelihood of a price decline. However, this pattern isn't always accurate and can sometimes be inaccurate, leading to price increases.
Past Instances of 'Death Cross' and Returns
Interestingly, both ICICI Bank and M&M have experienced this 'Death Cross' pattern four times in the last five years. However, on the three previous occasions, both companies defied this negative signal, and their stock prices delivered positive returns.
ICICI Bank:
A death cross formed in ICICI Bank in March 2023, but it reversed to a golden cross in May 2023, leading to a price surge. Similarly, death crosses occurred between April 2022 and August 2022, and April 2020 and November 2020. Despite these bearish signals, ICICI Bank saw gains of 11.4%, 14.1%, and 44.9% respectively during these periods.
M&M:
M&M also experienced a death cross in April 2023, but the stock price defied it in June 2023. Similar patterns were observed between March 2022 and May 2022, and August 2021 and November 2021, yielding an average return of 16%. However, a death cross in November 2018 led to a significant drop in M&M's share price from ₹708 to ₹234.
Current Technical Outlook for ICICI Bank and M&M
ICICI Bank:
Current Price: ₹1,315
Upside Potential: Up to ₹1,525 (approx. 16% increase)
Downside Risk: Down to ₹1,175 (approx. 10.7% decline)
Support Levels: ₹1,300, ₹1,280, ₹1,267
Resistance Levels: ₹1,342, ₹1,405, ₹1,478
If ICICI Bank's share price remains above ₹1,300, an upward trend may continue. Breaking above ₹1,405 could lead to further gains towards ₹1,478 and potentially ₹1,525. However, a fall below ₹1,267 increases the risk of further decline.
M&M:
Current Price: ₹2,828
Upside Potential: Up to ₹3,380 (approx. 19.5% increase)
Downside Risk: Down to ₹2,000 (approx. 29.3% decline)
Support Levels: ₹2,715, ₹2,570, ₹2,335, ₹2,150
Resistance Levels: ₹2,875, ₹2,925
M&M's stock is currently trading below its significant moving averages, indicating a bearish trend. A close above ₹2,925 could trigger an upward movement, potentially reaching ₹3,380. On the downside, ₹2,715 and ₹2,570 are key support levels; breaking below these could lead to a decline towards ₹2,000.
