Asian Paints is in a downtrend since its November 2013 high of ₹560. However, the sideways consolidation between ₹465 and ₹485 over the last two weeks signals a bottom formation of the current downtrend.

The 50 per cent Fibonacci retracement level at ₹468 is providing strong support and preventing a continuation of the fall. The stock is not moving decisively below this level, despite being tested almost every day. On the other hand, a decisive close above the 200-day moving average, currently at ₹478.6 was recorded on Wednesday. The relative strength index indicator is also giving bullish signals. Ergo, technical indicators are suggesting that a sharp reversal is on the cards.

The stock is expected to gain momentum in the upcoming trading sessions.

A rise to ₹492 and ₹495 looks likely now. Short-term traders can go long with a stop-loss at ₹480. The bullish outlook will get negated only if the stock records a strong close below ₹465.

NOTE: The recommendations are based on technical analysis. There is a risk of loss in trading.

(This article was published on February 5, 2014)
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