Technical Analysis

Indraprastha Gas re-bounds from a key base

Yoganand D | Updated on July 31, 2018 Published on July 29, 2018

An emphatic break above ₹300 can take the stock up to ₹340 over the long term

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

I want to buy Indraprastha Gas and V-Guard Industries for the long term. What is the technical outlook for these two stocks?

Y Suneeta

Indraprastha Gas (₹294.9): Following a medium-term downtrend from the 52-week high of ₹344 (adjusted) in early January 2018, the stock found support in the band between ₹242 and ₹252 in late May. It re-tested this support band in late June and changed direction, triggered by a positive divergence in the daily and weekly indicators. Since then, the stock has been in a nascent uptrend. While trending up, it breached the key resistances at ₹265 and ₹280. The stock has surged 16.5 per cent with good volume over the last two weeks.

 

However, the stock now tests a significant resistance at ₹300 and its 200-day moving average. Hence, there could be a near-term corrective decline which medium-term investors can consider as a buying opportunity and accumulate the stock with a stop-loss at ₹240. An emphatic break above ₹300 can take it northwards to ₹320 and ₹340 over the medium-to-long term.

Conversely, a strong below the key support level of ₹242 can bring back selling pressure and drag it lower to ₹225 and ₹220 in the long run. The long-term uptrend will remain in place as long as the stock trades above ₹190. Long-term investors can stay invested with a stop-loss at ₹180 levels.

V-Guard Industries (₹213.8): The stock gained 3.5 per cent with an above average volume on Friday, decisively breaching a key resistance at ₹206 and 50-day moving average as well. For the week, the stock had surged 10.6 per cent conclusively, breaking above a long-term resistance level of ₹200. But a key resistance is ahead at ₹220.

 

 

An emphatic breakthrough of this barrier can take the stock up to ₹235 in the short term. A strong rally beyond ₹235 can lift the stock to ₹250 levels in the medium term. An eventual break above the medium-term hurdle at ₹250 will reinforce the long-term uptrend and take the stock to new highs.

On the other hand, a fall below the immediate support level of ₹200 can drag the stock down to ₹190 and ₹180 levels in the short-to-medium term. However, a plunge below the significant long-term support level of ₹180 will begin to threaten the primary uptrend and drag the stock down to ₹170 or ₹160 levels.

Long-term uptrend will remain in place as long as the stock trades above ₹150 levels. Investors with a long-term horizon can stay invested with a stop-loss at ₹140 levels.

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Published on July 29, 2018
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