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The stock of Elgi Equipments, which is on a rally since November last year, was moving in a tight range between ₹350 and ₹364 for the past few trading sessions. On Wednesday, the scrip broke out of this range and marked a fresh lifetime high of ₹382.7 before closing the session a little lower at ₹373.8.
The breakout is likely to induce more positive momentum. Supporting the bullish bias, the breakout volume is high and indicators like the relative strength index (RSI) and the moving average convergence divergence (MACD) on the daily chart are showing an uptick. So, in the forthcoming sessions, the stock will most probably appreciate more.
On the upside, the stock is likely to face hurdles at ₹390 and at ₹400 whereas the downside movement can be limited by the resistance-turned-support level of ₹364.
Given the above factors, traders can consider fresh short-term longs. Buy with stop-loss at ₹360. When the stock surpasses ₹390, revise the stop-loss to ₹370. Liquidate the longs when the price hits ₹400.
(Note: The recommendations are based on technical analysis. There is a risk of loss in trading.)
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