Technical Analysis

JK Tyre in a consolidation phase

Yoganand D | Updated on January 20, 2018 Published on June 05, 2016

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

I have shares of JK Tyre bought at an average price of ₹88. What is the outlook for the stock?

Murali

JK Tyre and Industries (₹86.3): The stock of JK Tyre and Industries decisively broke out of a significant resistance at ₹65 in September 2014.

Subsequently, it accelerated sharply and registered an all-time high at ₹162.9 in mid-December 2014. Since then, the stock has been on an intermediate-term downtrend.

However, the significant support at around ₹78 provided base for the stock in late February this year.

After whipsaws below ₹78, the stock bounced back and has been on a sideways consolidation phase in the band between ₹78 and ₹88. Last week, the stock surged about 4 per cent. It now tests a resistance band between ₹88 and ₹90. A conclusive breakthrough of this band will alter the short-term trend from sideways to bullish. The stock can then trend higher to ₹100 and ₹105 levels in the short term. Decisive rally beyond ₹105 can see the stock target ₹120 and ₹130. To alter the intermediate-term downtrend, the stock needs to breach the vital resistance level at ₹130 for an up-move to ₹150 and ₹160 levels.

Investors with a long-term perspective can stay invested with a stop-loss at ₹78. On the other hand, inability to move beyond ₹90 can retain the stock’s sideways movement.

A downward breakthrough of ₹78 will strengthen the downtrend and drag the stock down to ₹74 and ₹65 levels. In such a scenario, investors can exit the stock and stay on the sidelines.

Can you please give me the technical outlook for NCC?

JD Vengurlekar

NCC (₹70.5): In August 2013, the stock of NCC found base at around ₹11 and bottomed out. Since then, it has been on a long-term uptrend.

However, the stock encountered resistance at ₹118 in April and started to decline. Important support in the band between ₹55 and ₹58 cushioned the stock’s decline in September 2015 and February 2016.

But, on the upside, the key resistance at ₹82 is limiting the stock’s rally. After hitting this resistance in late April, the stock has been on a short-term downtrend. While trending down, it has breached its 50 and 200-day moving averages recently.

The stock now tests a support at ₹70. An emphatic fall below this level can pull it down to ₹60 and then to ₹55. Further decline below ₹55 will mitigate the uptrend and drag the stock down to ₹50 and then to ₹40 in the medium to long term.

Conversely, a strong rally above ₹82 will reinforce the bullish momentum and take the stock northwards to ₹90 and ₹100 levels in the medium term. Next resistances are at ₹110 and ₹118.

I have bought IL&FS Transportation Networks shares at an average price of ₹121 per share. What is the long-term prospect for the stock?

Subir

IL&FS Transportation Networks (₹69.5): The stock is in a downtrend across the short, medium and long term. In August 2015, it witnessed a steep nose-dive, breaking a key long-term support at ₹100. This psychological support subsequently turned into a crucial resistance and limited the stock’s upside thereafter.

Nevertheless, the stock found support at around ₹65 in February 2016 and has been on a sideways movement in the range between ₹65 and ₹80.

The indicators in the weekly chart are displaying positive divergence, implying that a trend reversal is on the cards. You can wait and consider averaging on a strong rally above the immediate resistance level at ₹80 which will signal a trend reversal.

The stock can then trend up to ₹100. An emphatic breakthrough of ₹100 can pave way the way for an up-move to ₹120 and ₹135 level in the medium to long term.

To alter the intermediate-term downtrend, the stock needs to conclusively breach the significant long-term resistance at ₹165 to target ₹200. On the downside, a slump below the immediate key support level of ₹65 will strengthen the downtrend and take the stock to ₹60 or even to ₹50 in the medium term.

Send your queries to techtrail@thehindu.co.in

Published on June 05, 2016
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