Technical Analysis

Stock query: Aurobindo Pharma in medium-term uptrend

Yoganand D | Updated on February 22, 2020 Published on February 22, 2020

The stock currently tests the next vital resistance at ₹600

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

What is the prospect of Aurobindo Pharma? Can I average it at the current market price?

Pradeep K

Aurobindo Pharma (₹599.5): The stock of Aurobindo Pharma skyrocketed 20 per cent with an upward gap, accompanied by extraordinary volume on February 19, by conclusively breaching a key long-term resistance between ₹540 and ₹550.

This rally strengthened the short- as well as the medium-term uptrend. But the stock currently tests the next vital resistance at ₹600. After encountering a key resistance at ₹835 in April 2019, the stock had been on an intermediate-term downtrend until it recorded a 52-week low at ₹389 in November 2019.

 

 

Subsequently, it changed direction, triggered by positive divergence in the weekly relative strength index (RSI). Since then, the stock has been in a medium-term uptrend. While trending up, it had surpassed a crucial resistance at around ₹470 in early January, which turned into a support and provided cushion in early February.

Notably, the recent rally has emphatically breached the 200-day moving average. The stock now hovers way above the 50- and 200-day moving averages.

Interestingly, there has been an increase in daily volume since early February. The short-to-medium-term outlook is bullish.

A decisive break above ₹600 can pave the way for an up-move to ₹650 and ₹675 levels.

Only a strong breakthrough of ₹675 is needed to alter the intermediate-term downtrend and take the stock northwards of ₹715 and ₹750 levels.

The subsequent major resistances are at ₹770 and ₹800.

On the downside, key supports at ₹550 and ₹500 can buttress the stock. But a plunge below ₹470 will mar the medium-term uptrend and pull the stock lower to ₹₹450 and ₹430 levels. You can buy the stock at the current levels with a stop-loss at ₹460.

 

I hold JSW Steel at ₹280 and Amara Raja Batteries at ₹750. Kindly let me know when I can exit from these stocks without loss.

Ashok Kulkarni

JSW Steel (₹281.7): After forming a strong base at ₹206, the stock took support at this level in early October 2019 and commenced to trend upwards.

Since then, it has been in a medium-term uptrend.

However, the stock recently met with a resistance at ₹295 and is in a corrective down-move. A decisive break above ₹295 can push it higher to ₹310, which is a significant long-term barrier.

 

 

To strengthen the uptrend, the stock needs to surpass this hurdle. In that case, an up-move to ₹325 and then to ₹340 is possible over the medium term.

A key support at ₹260 can cushion the stock. That said, a downward break of this base can bring back selling pressure and drag the stock down to ₹243.

The next supports are at ₹230 and ₹206. You can average on a rally above ₹295 with a stop-loss at ₹260.

 

Amara Raja Batteries (₹769.9): The stock faces hindrance in decisively breaking above a key resistance at ₹800.

Consider exiting with a minor profit if the stock fails to move beyond this barrier in the short term.

But a positive break above ₹800 can take it upwards to ₹830 and ₹850 levels over the short term. In that scenario, stay invested with a stop-loss at ₹740.

 

 

A tumble below the immediate support can drag it down to ₹720 or ₹700 levels.

 

Send your queries to techtrail@thehindu.co.in

Published on February 22, 2020
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