Technical Analysis

MRF breaks a key barrier

Yoganand D | Updated on March 10, 2018 Published on September 04, 2016

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A strong rally beyond ₹40,000 can push the stock up to ₹41,000 and then to ₹43,000

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

I have shares of MRF bought at ₹39,900. Should I average it?

R C Bhatia

MRF (₹38,827.3): On Friday, the tyre company stocks were in focus and gained between 4 and 9 per cent, as natural rubber prices touched a near three-month low. The stock of MRF jumped 4 per cent, decisively breaching a key resistance at ₹38,000 accompanied by good volumes. Moreover, with this rally, the intermediate-term downtrend that had been in place from the August 2015 peak at ₹46,405 has reversed. The stock took support at ₹31,000 in late July this year and bounced back. Since then, it has been on a medium-term uptrend and now appears to have resumed its long-term uptrend. The stock trades well above its 50 and 200-day moving averages. You can make use of dips to average the stock with a stop-loss at ₹34,000.

An emphatic rally beyond the immediate resistance at ₹40,000 can push the stock up to ₹41,000 and then to ₹43,000. Next long-term target for the stock is at ₹46,000. On the other hand, a strong fall below the key support at ₹34,000 will alter the medium-term uptrend and drag the stock down to ₹31,000. A decisive slump below ₹31,000 will strengthen the , which will also be a threat to the primary uptrend, and pull the stock down to ₹27,500 and then to ₹24,500 in the long term.



I bought shares of VRL Logistics at ₹365. Can I average at current levels? What are the medium and long-term prospects for this stock?

Rajeev

VRL Logistics (₹290.2): Following a sharp nose-dive in late May 2016, the stock of VRL Logistics found support in the band between ₹260 and ₹270.

Later, the stock changed direction, triggered by positive divergence and started to trend upwards. Nevertheless, this uptrend was short-lived as the stock, in late July, encountered a key resistance at ₹365 which also coincides with the 50 per cent fibonacci retracement level of the prior downtrend.

Thereafter, the stock started to continue its intermediate-term downtrend that was in place since the September 2015 peak at ₹478.7. Short-term trend is also down for the stock.

It hovers above the key support band between ₹260 and ₹270. You can wait and consider averaging the stock on an upward reversal from this support zone with a stop-loss placed at the level of ₹250.

But a decisive fall below ₹260 can reinforce the downtrend and pull the stock to new lows. Strong rally above the immediate resistance at ₹307 can push the stock higher to ₹340 and then to ₹365.

The stock needs to conclusively break out of the significant resistance at ₹365 to alter the downtrend and take it higher to ₹400, ₹430 and ₹450 levels in the long run.

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Published on September 04, 2016
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