Technical Analysis

Canara Bank in a medium-term uptrend

Yoganand D | Updated on March 10, 2018 Published on September 18, 2016




Strong rally beyond ₹325 can strengthen the stock’s momentum and take it to ₹350

Here are answers to readers’ queries on the performance of their stock holdings.

I have shares of Canara Bank bought at ₹270. Can I hold for another six months to a year?


Canara Bank (₹300.7): After hitting a multi-year low at ₹156 in late February 2016, the stock of Canara Bank bottomed out. Since then, it has been on an intermediate-term uptrend. This uptrend has retraced 50 per cent Fibonacci retracement level (which is at ₹315) of the prior downtrend that commenced from the January 2015 peak of ₹478.

The stock trades well above its 50- and 200-day moving averages. Following a strong rally recently, the stock encountered resistance in the band between ₹315 and ₹325. A decisive breakthrough of this resistance will alter the downtrend and take the stock higher to ₹350 in the medium term.

Further rally beyond ₹350 could strengthen the bullish momentum and take the stock northwards to ₹400 in the coming year. Targets beyond ₹400 are ₹450 and ₹480. Both short as well as medium-term trends are up for the stock.

However, an emphatic fall below the key immediate support at ₹250 will alter the medium-term downtrend. The stock can then decline to ₹220 and ₹200 levels. Investors with a long-term perspective can hold their positions and also make use of declines to buy the stock while maintaining a stop-loss at ₹235. Immediate supports are pegged at ₹280 and ₹260.

I am holding NTPC shares purchased at ₹158 for the past two years. What are its prospects?

Tomy Joseph

NTPC (₹153.5): The stock of NTPC encountered a significant resistance in the band between ₹165 and ₹170 in August.

This limited the stock’s rally during June 2014 and March 2015. After testing this hurdle, the stock once again changed direction.

Moreover, this reversal has been triggered by a prolonged negative divergence in the daily moving average convergence divergence indicator and formation of a bearish engulfing pattern at the resistance band.

Last week, the stock fell 3.3 per cent, breaching a key immediate support at ₹158. Further, the stock decisively breached its 21- and 50-day moving averages and trades well below them. The indicators on the daily chart, such as moving average convergence divergence and price rate of change, hover in the negative territory, backing the bearishness. The stock can extend its ongoing decline and find support at ₹145 and ₹135 levels.

A rise from these supports can take the stock upwards to the vital resistance band between ₹165 and ₹170 in the medium term. You can make use of declines to average the stock with a stop-loss at ₹130. An emphatic slump below the important support at ₹135 will alter the intermediate-term uptrend that has been in place from the August 2015 low of ₹107. In such a scenario, the stock can decline to ₹125 and ₹115 levels. Strong break-out of ₹170 will strengthen the uptrend and take the stock of NTPC northwards to ₹190 and ₹200 in the long term.

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Published on September 18, 2016
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