Chart Focus : Gitanjali Gems – Buy

Yoganand D. BL Research Bureau | Updated on February 13, 2011


Investors with medium-term perspective can consider buying the stock of Gitanjali Gems (Rs 225.9). The company manufactures and retails jewellery.

Following a sharp decline from its November 2010 peak of Rs 395, the stock found support around Rs 160 in early December 2010. Subsequently, the stock started trending higher and has been on a medium-term uptrend. This uptrend has been backed with good volumes during advance day's depicting strength in the trend.

The long-term trend is up for the stock from its March 2009 low of Rs 32. Taking support from Rs 182 (long-term uptrend-line), the stock bounced up 19 per cent accompanied with extraordinary volumes on Friday.

The stock has emphatically broken out of its moving average compression (21, 50 and 200-day moving averages) around Rs 200. Moreover, with the recent surge, the stock has penetrated its immediate key resistance at Rs 216 and appears to have resumed its long-term uptrend.

The stock has advanced 15 per cent during the previous week. The daily moving average convergence divergence is steadily inching higher in line with stock price towards its positive territory whereas weekly MACD is already featuring in the positive territory.

The 14-day relative strength, which determines the speed and alteration of price movements, has entered the bullish zone from the neutral region and weekly RSI is rising towards bullish zone. Since the stock's long-term uptrend-line is intact, we are bullish on the stock from a medium-term perspective.

We believe that the stock has the potential to trend northwards until its reaches our medium-term target of Rs 260, with a slight pause around Rs 245. Considering the volatility in the broader market, investors can consider accumulating the stock in declines in the band between Rs 215 and Rs 225, while maintaining a stop-loss at Rs 190.

(This recommendation is based on technical analysis. There is a risk of loss in trading.)

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Published on February 13, 2011
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