The Indian markets have made it clear that the possibility of a bounceback after 4 straight weeks of decline should not be ruled out. As of 2:37 PM IST, all sectoral indices are trading in the green zone, except a couple of them, denoting a positive breadth in the market.

The index is shining today with a gain of 1.13% to 30,947, making it the top-gaining index for the day so far. While there are many counters that can be searched for long opportunities but high-risk traders should have a look at Vedanta Ltd (NS:). The company has a market capitalization of INR 86,672 crore and holds a weightage of 6.23% in Metal.

Image Description: Daily chart of Vedanta with RSI at the bottom

Image Source: Investing.com

The stock is a perfect example of a falling knife. It has tumbled sharply in the last few sessions and is down 15% for the month so far. Nifty Metal is down 2.7% in the same period, denoting a sharp underperformance of the former.

However, the demand for the stock is coming back which can be seen via a small sideways movement in the counter in the past week. Also, to support the bullish view, traders can spot a bullish divergence at the very bottom which can also become a reason for the impending rally from here.

The best part about this counter is, in case someone is planning to go long, the exit levels in case of a loss are very near while the profit potential is quite high, making the risk-to-reward ratio (R:R) massively in favor of the trader.

Currently, the stock is trading 0.5% up at 234.6 and traders can maintain a stop loss below the 52-week low of INR 232. That‘s it. The max loss is capped at around INR 2.5 per share while the upside rally can take the stock to INR 245, a profit potential of INR 10.5 per share, translating into an R:R of 1:4.2.

However, as the trend is still negative, the probability of SL getting hit is high.

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