Adani share price forms a rare pattern ahead of earnings

Adani Enterprises (NSE: ADANIENT) share price has formed a rare death cross pattern ahead of the company’s earnings. After rebounding to a high of 2,232 INR last week, the shares have tumbled by ~25% to ₹1,670. It has tumbled by ~60% from its highest point this year.

Adani earnings ahead

Adani Enterprises stock is forming a rare pattern known as a death cross. This pattern forms when the 200-day and 50-day volume-weighted moving averages (VWMA) makes a bearish crossover. 

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The company is still making headlines after the stinging Hindenburg report that I wrote about here. On Monday, the company announced that Adani Electricity paid $19.7 million bond payment. The company has insisted that its balance sheet remains robust as the conglomerate has already paid $50 million since the short-seller report came out.

Adani Enterprises will be in the spotlight on Tuesday as the company publishes its financial results. These earnings will provide more color about the state of the company and the broader conglomerate as it navigates its biggest crisis on record.

In a report by Bloomberg, the company is expected to lower its growth forecast dramatically. This will see it aim for a growth target of between 15% and 20% for the next fiscal year. Before that, the company was expecting its growth forecast was about 40%. 

This growth revision will happen as the company focuses on debt reduction, cash savings, and boosting stock prices. Another major Adani Enterprise news was from the FT, which said that the firm will appoint a financial controller in a bid to improve governance. The controller will oversee various trusts that own the company.

Is Adani Enterprises a good contrarian buy?

Adani Enterprises’ share price has formed a death cross pattern, as shown in the daily chart. In technical analysis, this is usually a sign that the bearish trend will continue. There is also a risk that the rebound that happened recently was a dead cat bounce. This is a bounce that happens after a financial asset plummets.

However, on a positive note, Adani share prices have become much cheaper than where they started the year at. Also, it seems like most of Hindeburg’s concerns have no major bearing on the company’s performance. The accusations were that a complex web of shell companies were manipulating the stock.

While these matters are serious, they have little weight compared to other historical blowouts. For example, Hindenburg did not accuse Adani of accounting fraud, which brought down companies like Enron and Wirecard. 

Therefore, in the near term, I expect that the Adani stock price will maintain its volatility as headline risks remain. In the long run, we can’t rule out a rebound as fear among market participants abates.