Technical Analysis

ICICI Bank in recovery mode

Yoganand D | Updated on January 17, 2018 Published on August 28, 2016

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A strong rally above ₹270 can take the stock higher to ₹290-310 levels



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

I have shares of ICICI Bank bought at ₹340 and shares of Lakshmi Machine Works purchased at ₹4,012. Should I accumulate or book loss?

RC Bhatia

ICICI Bank (₹245.2): After registering an all-time high at ₹393 in January, the stock of ICICI Bank started to decline. Since then, it has been on an intermediate-term downtrend. The stock found support at around ₹180 in February 2016. Subsequently, it changed direction and was on a corrective up-move until it encountered a key resistance at ₹270 in July.

This resistance also coincides with the 38.2 per cent fibonacci retracement level of the prior downtrend at ₹260, making the band between ₹260 and ₹270 a strong resistance region for the stock. An emphatic breakthrough of this resistance can take the stock higher to ₹290 which is a significant long-term hurdle.

However, to alter the intermediate-term downtrend, it needs to emphatically break this hurdle. Then, the stock can trend upwards to ₹310 and ₹330 levels in the medium to long term.

Next key resistances are at ₹350 and ₹370. Near-term trend is down and the stock can find support either at ₹230 or ₹220 levels. An upward reversal from these supports can take the stock higher to the ₹260-₹270 band.

But a conclusive fall below ₹220 will mar the medium-term corrective rally and pull the stock down to ₹180. Investors with a long-term view can make use of dips to buy the stock with a stop-loss at ₹170. Consider booking profits at ₹270 and ₹290 levels. You can consider averaging the stock on declines with a stop-loss at ₹210.

Lakshmi Machine Works (₹3,860.1): The stock of Lakshmi Machine Works took support at ₹3,100 in February and resumed its long-term uptrend. Since then, it has been on a medium-term uptrend. However, the key resistance at ₹4,000 is limiting the stock's upside now. Over the last two months, the stock tested this key resistance and faces difficulty in surpassing it.

The stock trades well above its 50 and 200-day moving averages. You can consider averaging the stock on declines with a stop-loss at ₹3,300. Strong break out of the immediate resistance at ₹4,000 will reinforce the bullish momentum and take the stock up to ₹4,300 and ₹4,500 in the long term. Conversely, a decisive fall below the support zone of ₹3,000 and ₹3,100 will mar the long-term uptrend and pull the stock down to ₹2,800 and ₹2,600. Immediate supports are at ₹3,600 and ₹3,400.

I am a long-term investor in Vedanta. I want to book some profit for the short term. Please advise.

Suneeta Yerava

Vedanta (₹169.3): The stock of Vedanta has surged three-fold since taking support around ₹60 in February 2016.

But, it met with a key resistance at ₹180 and has plummeted 5.4 per cent last week. There has been a decrease in weekly volumes over the past four weeks.

Moreover, the daily moving average convergence divergence and weekly relative strength index display negative divergence implying trend reversal.

Therefore, you can consider booking profits at this juncture and remain on the sidelines.

A decisive fall below the immediate supports at ₹160 and ₹155 can alter the short-term uptrend and pull the stock down to ₹140 and ₹128 levels in the coming months.

Next key supports are at ₹110 and ₹100.

On the upside, the stock needs to emphatically breakthrough the immediate resistance at ₹180 to strengthen the uptrend and take it upwards to ₹200 and ₹220 levels.

Send your queries to techtrail@thehindu.co.in

Published on August 28, 2016
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