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Investors with medium-term perspective can consider buying the stock of Federal Bank (Rs 445.3). The stock bottomed out in March 2009, taking support from its long-term base in the range between Rs 110 and Rs 120.
Since then, it has been on a long-term uptrend forming higher peaks and troughs. Moreover, in February 2011, the stock's medium-term down trend came to an end as the stock took support in the band between Rs 330 and Rs 340.
Subsequently, the stock changed direction, triggered by positive divergence in daily relative strength index and moving average convergence divergence indicator.
The stock conclusively broke through its immediate key resistance as well as 200-day moving average around Rs 390 by rallying more than 8 per cent, backed with good volumes in the last week of March. In the previous week, the stock advanced 5 per cent with good volumes reinforcing the bullish momentum.
It has retraced more than 61.8 per cent fibonacci retracement level of its prior downtrend and the stock appears to have resumed its primary trend that is up. The stock is trading well above its 21 and 200-day moving averages.
The 14-day relative strength index is featuring in the bullish zone and the weekly RSI has entered in to this zone from the neutral region. Daily MACD is inching higher in line with the stock and weekly MACD has signalled a buy.
We are bullish on Federal Bank from a medium-term perspective. We believe that its ongoing up move has the potential of progressing further until it reaches our medium-term price target of Rs 520, with a minor pause around its previous of Rs 501. Investors with medium-term perspective can consider buying the stock with stop-loss at Rs 405.
Follow up – Provogue India (Rs 46.2)
After rallying to an intra-week high of Rs 48.9, the stock retreated to our recommended price level. We reiterate our medium-term bullish outlook on the stock with price target and stop-loss as mentioned last week.
(This recommendation is based on technical analysis. There is a risk of loss in trading.)
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