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Why IEX Limited is Dropping: Profit-Taking and Market Coupling Explained

Why IEX Limited is Dropping: Profit-Taking and Market Coupling Explained

Introduction: IEX Limited, one of India’s leading power trading platforms, is facing a significant price drop, with the stock trading at ₹220 after reaching a high of ₹248. While this decline may raise concerns, it’s essential to understand the underlying factors at play. Two key reasons are influencing this movement: the stock achieving its technical targets and the Indian government’s decision to introduce market coupling. In this article, we’ll dive into the technical patterns, recent market changes, and what they mean for IEX’s stock performance in the short and long term, providing a comprehensive analysis for investors.

1. Achievement of Previous Targets

Our initial technical analysis of IEX Limited indicated that the stock would hit targets near ₹245, a projection we made when it was trading at levels close to ₹120 and ₹110. If you have followed our previous updates, you would have seen that the curve we identified in our analysis has now completed, and the stock did in fact reach ₹248.

With the stock hitting these predetermined targets, it is not surprising to see selling pressure mounting. This is typical behavior when traders book profits after achieving key technical levels. The curve we had drawn has now been fulfilled, resulting in the current downward movement.

2. Impact of Market Coupling

The second and more significant reason for the decline is related to recent news regarding market coupling. As per current regulations, 90% of power trading in India is conducted through AAS (Automated Auction System). However, the introduction of market coupling will allow other exchanges to participate more actively, potentially disrupting IEX’s market dominance.

Market coupling refers to the unification of buy and sell orders across multiple exchanges via an MCO (Market Coupling Order). This change will eliminate price discrepancies between different power exchanges, leveling the playing field for competitors and reducing IEX’s monopoly in power trading. Consequently, investors have reacted negatively, leading to selling pressure on the stock.

Short-Term Technical Outlook

From a technical standpoint, I am using a weekly time frame to analyze the stock’s movement. Based on the patterns, it appears that if the stock forms similar candles by the end of this week, we can confirm that all targets have been reached. In such a case, we can expect the stock to pull back further, potentially finding support around the ₹188-190 level.

After this, the stock may consolidate and start to move upwards again, as the technical support will provide a base for future gains. In the meantime, resistance levels are seen around ₹240-245, and a breakout above ₹250 could lead to further upward momentum, potentially forming new curves on the chart.

Conclusion

For those who have not yet exited their positions, it is important to consider the resistance levels. The ₹245-250 range will serve as a key area where selling may continue. If the stock manages to break through this resistance, a new upward trend may form. However, with the current news of market coupling and profit-booking by early buyers, we may see further downside in the near term.

For long-term investors, it is essential to keep an eye on the support levels near ₹188-190, as this could provide an opportunity to enter the stock once again. Overall, while the news has brought some volatility, IEX Limited remains a well-performing company in the power trading space, and opportunities for future growth still exist.

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