Technical Analysis

Graphite India tests a key barrier

Yoganand D | Updated on February 27, 2021

I am holding shares in Graphite India and HEG. Please advise their short-, medium- and long-term prospects.

Bhaskar Parab

Graphite India (₹481.3): The stock of Graphite India has been in an intermediate-term uptrend since it took support at around ₹103 in March 2020. However, the stock had met with key resistance at ₹200 in May 2020 and consolidated sideways in the band between ₹160 and ₹210 until the stock broke out of this sideways movement in November 2020. Since then, the stock has been in a medium-term uptrend.

While trending up, the stock has conclusively breached key resistances at ₹300 and ₹400 in January and early February this year. Nevertheless, the stock now tests a key hurdle at ₹500 which is limiting the upside. The daily relative strength index is displaying negative divergence implying short-term trend reversal is on the cards. The weekly RSI is hovering in the overbought territory. Moreover, there has been decrease in volume over the past one week. A corrective decline from the current levels can drag the stock down to the key support level of ₹450 and then to ₹400 over the medium term.

An empathic downward break of ₹400 can start threatening the medium-term uptrend and pull the stock down to ₹360 and then to ₹300 levels. Investors with a long-term perspective can hold the stock with a stop-loss at ₹285. On the upside, a decisive break above ₹500 can push the stock northwards to ₹550 initially and then to ₹600 which is a significant long-term resistance to note. Next resistances are at ₹660 and ₹700.

HEG (₹1,445.8): The stock of HEG being a peer company to the Graphite India has witnessed a similar chart movement over the past one year. In November 2020, the stock breached a key resistance at ₹800 and continued to trend upwards, surpassing key hurdles at ₹1,000 and ₹1,200 levels. But, the stock now tests a key resistance at ₹1,500. A strong break above this level can take it higher to ₹1,600 and then to ₹1,700 levels.

A further breakthrough of ₹1,800 can accelerate the stock northwards to ₹2,000 over the long run. Conversely, if the stock declines below the key support level of ₹1,400, it can be pulled lower to ₹1,300 and then to ₹1,200 levels. The short-term uptrend will get negated if the stock falls below ₹1,200 levels.

In that case, the stock can fall to ₹1,100 or even to ₹1,000 levels. Investors with a long-term horizon can stay invested with a stop-loss at ₹900 levels.

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Published on February 27, 2021
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