Magellanic Cloud shares crash 10%, extending the four-day run to 46%. What drives the jump?

Shares of Magellanic Cloud fell 10% to hit the lower circuit at Rs 33.30 apiece on Thursday, extending a brutal fall of over 46% in four sessions, in a steep sell-off that has unfolded despite the company announcing a new rail contract earlier this week.The sharp correction comes even after the company announced a new order win from East Coast Railway on Monday, raising questions about what’s driving investor sentiment as the shares continue to unravel.

The East Coast Railway’s command cannot stop the shift

On November 24, Magellanic Cloud announced that it has received a Letter of Acceptance (LoA) from East Coast Railway for the supply, installation and commissioning of a crew voice and video recording system (CVVRS) for electric locomotives. The company said the contract has a total value of Rs 6 crore and is expected to be executed over a period of three years. “This project will help improve operational safety, improve research efficiency and increase accountability for crew performance on the rail network,” the company said.

Magellanic Cloud added that the order confirms its established expertise in handling comprehensive operational oversight mandates for customers with critical public infrastructure, including the rail network, and strengthens its leading position in delivering “cutting-edge and sophisticated” train protection platforms.

Magellanic’s dramatic rise and an even sharper fall

The recent collapse follows a volatile year for the stock. After hitting a low of Rs 42.49 in March, Magellanic Cloud rose over 148% in just four months to hit an all-time high of Rs 105.42 in July. From that high, shares are now down about 68%. In the past month alone, the stock is down more than 39%, while it is down about 55% year-over-year.Magellanic Cloud currently has a market capitalization of Rs 1,946 crore, and the stock’s price-to-earnings (P/E) ratio is around 34.

Technical signals

From a technical perspective, the stock is sending strong bearish signals. Magellanic Cloud is trading below all eight of its major simple moving averages, including the 5-day, 10-day, 20-day, 30-day, 50-day, 100-day, 150-day, and 200-day averages, indicating continued weakness on the short- and long-term charts.

The Relative Strength Index (RSI) stands at 28.9, below the 30 threshold generally considered an oversold zone, suggesting a recovery from these levels could be possible. However, the Moving Average Convergence Divergence (MACD) remains at -4.6 and is trading below both the signal line and the zero line, reinforcing a strong bearish trend in the stock.

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