Technical Analysis

Castrol tests a key long-term base

Yoganand D | Updated on May 27, 2018 Published on May 27, 2018

Taking support at ₹161, the stock bounced back, gaining 7.6 per cent with good volume

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

What is the long-term view on Castrol?

Sudhin B

Castrol India (₹175.2): Since encountering a significant long-term resistance at around ₹272 (adjusted) in December 2014, the stock of Castrol India has been trending down.

However, significant long-term support at ₹180 provided a strong base and cushioned the stock until February 2017.

This support level, however, failed to provide base during the stock's recent fall. It decisively breached the key support at ₹180 in mid-May and recorded a multi-year low at ₹161 last week. But taking support at this low, the stock bounced back strongly gaining 7.6 per cent with above average volumes on Friday. The daily indicators have recovered from the oversold territory and there is buying interest emerging at lower levels.

The stock has formed a hammer candlestick pattern in the weekly chart, which is a bullish reversal pattern. Continuation of the up-move can encounter resistances at ₹180 and ₹185 in the near term. An emphatic break above these resistances can take the stock higher to ₹195 and ₹210 levels in the short to medium-term.

To alter the long-term downtrend, the stock needs to emphatically breakout of the significant long-term barrier at ₹210. This break can pave way for an up-move to ₹230 and ₹242 over the long run.

On the other hand, if the stock fails to move beyond ₹210, it can consolidate in a wide range between ₹180 and ₹210. A strong plunge below the key support level of ₹160 can drag the stock down to the next base placed in the ₹140-150 band.

You can consider buying the stock in declines with a long-term stop loss at ₹160.

I hold shares in Minda Industries. What are the stock’s prospects in the medium-to-long term?

Vijay Vihar Bandari

Minda Industries (₹1,294.3): The stock of Minda Industries skyrocketed 16 per cent, breaking above a significant resistance at ₹1,150 last week. But the stock now tests the next key long-term resistance at ₹1,300 levels. A break above this hurdle can take the stock up to ₹1,400 and ₹1,500 in the long term. However, if the stock fails to move beyond ₹1,300, a medium-term sideways movement is possible in a broad range between ₹1,050 and ₹1,300.

Key immediate supports at ₹1,150 and ₹1,050 can provide base for the stock during a corrective decline. But a conclusive plunge below ₹1,050 will threaten the long-term uptrend and drag the stock down to ₹950 and ₹900 levels over the medium term. Subsequent key support is pegged in the band between ₹800 and ₹810.

Investors with a long-term perspective can hold the stock with a stop-loss at ₹1,030 levels. You can consider taking partial profits if the stock fails to move beyond either ₹1,300 or ₹1,400 levels. Short-term uptrend will be mitigated if it slumps below ₹1,150 levels

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Published on May 27, 2018
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