Technical Analysis

IL&FS Transportation on weak ground

Yoganand D | Updated on January 24, 2018 Published on June 07, 2015





The stock is on a downtrend, breaking below the key support at ₹155 last week

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

Kindly advise the entry level for an investment horizon of three years for IDFC and IL&FS Transportation.

Brij Mohan Lal

IDFC (₹148.3): The stock of IDFC encountered a key long-term resistance in the range between ₹180 and ₹185 in early March 2015. Subsequently, the stock changed direction triggered by negative divergence and has been on a medium-term downtrend since.

While trending down, the stock decisively broke through the key supports at ₹165 and then recently at ₹153 . The short-term trend is also down for the stock. It hovers well below its 50- and 200-day moving averages. The indicators in the daily and weekly charts feature in the bearish zone backing the stock's downtrend.

However, the stock has significant supports, which can be considered for purchasing the stock, in the ₹130-₹135 range and then at the ₹110-₹115 band. A decisive fall below the immediate base zone of ₹130 and ₹135 can pull the stock down to its next support band. Investors can buy the stock at these support levels with a stop-loss at ₹103 levels.

An upward reversal can take the stock higher, initially to ₹165 and then to ₹185. The stock needs to decisively break the resistance at ₹185 for a long-term rally to ₹205 or ₹215 levels.

IL&FS Transportation Networks (₹145.3): The stock of IL&FS Transportation Networks is in a downtrend across all time frames.

Last week, the stock nose-dived more than 10 per cent, conclusively breaking the significant support level of ₹155. Since encountering a resistance at ₹225 in early March 2015, it has been on a medium-term downtrend. This downtrend accelerated further recently. As there is no immediate key support to provide a base, the stock can extend its decline to ₹130 levels in the short term.

A further breakthrough of key support at ₹130 can drag the stock down to ₹110 and ₹100 in the medium term. Therefore, you can wait for a while and buy at lower level with a stop-loss at ₹94. An upward reversal from these support levels can take the stock northwards to ₹170. Strong rally beyond this level can hit ₹190 and ₹225 levels in the long term.

I have City Union Bank bought at ₹94. Please advise me as to whether I should hold or buy more, or sell.

R Jaisankar

City Union Bank (₹102.6): This stock is an outlier among banking stocks, which have otherwise been on a decline in recent times. It is in an uptrend across all time frames.

However, in early March 2015, the stock encountered a resistance at around ₹103 and started to move sideways in a narrow range between ₹93 and ₹103. Now, the stock tests the upper boundary.

The indicators in the daily and weekly chart are not conducive for a breach of the upper boundary. There is more probability of a downward reversal from this resistance.

In that case, testing the lower boundary can’t be ruled out in the short term.

Hence, you can consider booking profits at the current juncture and exiting the stock, and re-entering at lower levels.

Further decline below the support level of ₹93 can pull the stock down to ₹87 and then to ₹80 in the short to medium term. Only a strong rally above ₹103 can push the stock higher to ₹110.

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Published on June 07, 2015
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