Technical Analysis

Stock query: IRCTC reverses higher, forming a key base

Yoganand D | Updated on April 05, 2020 Published on April 05, 2020

An emphatic break above ₹1,200 can extend the stock’s rally to ₹1,400

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

I have shares of IRCTC at a cost of ₹1,850 and IDFC First Bank at ₹42. Can I hold these shares for the medium term?

George Varghese

Indian Railway Catering and Tourism Corporation (₹1,083): The stock of IRCTC had been on an intermediate-term uptrend since its listing in October 2019, until it registered a new high at ₹1,995 in late February 2020. Subsequently, the stock reversed direction, triggered by negative divergence in the daily relative strength index (RSI).

Since then, it has been in a short-term downtrend. But the stock found support at around ₹800 in late March and began to trend upward once again. It is currently moving from circuit to circuit, thus providing limited opportunity to buy or sell.

Therefore, you can wait and average the stock at lower levels with a medium-term stop-loss at ₹750 levels.

The stock faces a key resistance ahead at ₹1,200. An emphatic break above this level can extend the corrective rally to ₹1,300 and then to ₹1,400.

The stock has a key trend-deciding level at ₹1,500. To alter the short-term downtrend, it needs to decisively break above this barrier.

Such an up-move can take the stock higher to ₹1,580 and then to ₹1,700. Subsequent resistances are at ₹1,850 and ₹2,000.

On the other hand, inability to move beyond the key resistance level of ₹1,500 can keep the stock moving sideways.

On the downside, a conclusive fall below the immediate support level of ₹1,000 can pull the stock down to ₹900 and then to ₹800 in the short term

That said, a further plunge below ₹800 will strengthen the downtrend and drag the stock down to ₹700 and then to ₹640 levels. Investors with a high-risk appetite can buy it in declines with a long-term stop-loss at ₹640.

IDFC First Bank (₹19.6): The stock of IDFC First Bank has been in a long-term downtrend since it encountered a key resistance at ₹80 in October 2016.

Both the medium- and the short-term trend are down.

While trending down, the stock had conclusively breached a key long-term support between ₹33 and ₹36 in early March 2020. As a result, the downtrend strengthened and the stock plummeted sharply.

It recorded a new low at ₹17.5 in mid-March and began to move sideways after that.

A strong fall below the immediate support level of ₹18 can pull the stock down to ₹15 or even to ₹10 in the medium term.

You can consider averaging the stock in declines with a fixed stop-loss.

A decisive rally above the immediate resistance level of ₹25 can take the stock higher to ₹28.

Subsequent resistances are placed at ₹33 and ₹36.

A break above these resistance will alter the short-term downtrend and take the stock higher to ₹40 and then to ₹45 in the long run.

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Published on April 05, 2020

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