Technical Analysis

Stock query: Coal India on a slippery slope

Yoganand D | Updated on February 16, 2020 Published on February 16, 2020

The stock tests a support band between ₹171 and ₹180; trend-reversal can take it to ₹200

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

I bought Coal India at ₹292. The stock is in a downtrend. Shall I hold or book loss and exit?

Krishna Mohan

Coal India (₹174.7): The stock of Coal India is in a downtrend across all-time-frames — short, medium and long term.

In June 2019, the stock encountered a key resistance at ₹270 and resumed its long-term downtrend. Since then, it has been in a medium-term downtrend.

A significant resistance at around ₹215 capped the stock’s upside in early November last year and again in early January this year; thereafter the stock continued to trend downwards.

Also, the short-term trend has been down since early January this year. The stock recorded a new low at ₹171 on February 1, and trades just above this level. It currently tests a vital support in the band between ₹171 and ₹180.

A decisive break below ₹171 can drag the stock down to ₹160 and then to ₹150 in the short-to- medium term. On the other hand, an upward reversal from the current support zone can take the stock higher to ₹200.

A strong break above this level is needed to alter the short-term downtrend and take the stock higher to ₹210 and then to ₹220 levels. To alter the medium-term downtrend, the stock needs to emphatically break above a key resistance level of ₹235.

Such a break-out can push the stock northwards to ₹250 and then to ₹270 in the long run. You can stay invested and average the stock on a decisive rally above ₹200 with a long-term stop-loss at ₹170. Consider exiting either at ₹250 or ₹270 levels.

What are the prospects of Mahanagar Gas?

Pradeep Kabra

Mahanagar Gas (₹1,160): A significant support at around ₹750 provided base for the stock of Mahanagar Gas in July 2019. The stock subsequently resumed its uptrend, and has been in an intermediate-term uptrend since then.

Medium- as well as short-term trends are also up for the stock. Nevertheless, the stock encountered a key resistance at ₹1,245 levels early February this year and stared to move sideways with a downward bias. Both the daily and the weekly relative strength indices are displaying negative divergence, indicating that a potential trend-reversal is on the cards.

The stock now hovers above a support at ₹1,150 levels. A decisive plunge below this base can drag the stock down to ₹1,100.

A further fall below ₹1,100 will mar the short-term uptrend and pull the stock lower to ₹1,000.

The subsequent supports are at ₹950 and ₹900. The intermediate-term uptrend will be altered if the stock slumps below ₹900. In that case, the stock can decline to ₹840 and then to ₹750 levels over the long term.

Conversely, if the stock breaks above ₹1,250 levels, it would appear resumption of the uptrend and push the stock higher to ₹1,300 and then to ₹1,350 levels.

Consider buying the stock at lower levels with a stop-loss at ₹950.

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Published on February 16, 2020
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