Technical Analysis

Stock query: ITC tests a key short-term barrier

Yoganand D | Updated on May 24, 2020

If it fails to move beyond ₹190, it will remain sideways between ₹158 and ₹190 for a while

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

What is the technical outlook for the stocks of ITC and L&T? I am a long-term investor; should I hold and average, or sell them?

Kavitha Jegadesh, Sibi

ITC (₹186.3): In early May, the stock of ITC took support at ₹158 and resumed the short-term uptrend that has been in place since late March this year.

The stock jumped 13.2 per cent in the past week accompanied by good volume.

But it currently tests a key short-term resistance at ₹190.

The stock has been in a long-term downtrend from the 2017 high of ₹353. The intermediate-term trend is also down for the stock. As long as it trades below the significant resistance in the band between ₹250 and ₹260, the long-term downtrend will remain in place. To alter the intermediate-term downtrend, the stock needs to decisively break above the vital barrier at ₹222.

Such a breakthrough will pave the way for an up-move to ₹235 and then to ₹250 levels.

An emphatic break above the current resistance level of ₹190 will strengthen the short-term uptrend and take the stock higher to ₹200 initially and then to ₹222 over the medium term.

That said, if the stock fails to move beyond ₹190, it will remain sideways in a wide range between ₹158 and ₹190 for a while.

The immediate support is at ₹173. A slump below this base can pull the stock down to the lower boundary at ₹158. A further plunge below ₹158 will reinforce the downtrend and drag it lower to ₹150 and then to ₹140 levels.

You can consider averaging the stock in declines with a long-term stop-loss at ₹150. Consider booking partial profit if the stock struggles to move beyond ₹250 levels. The key resistances above ₹260 are ₹275 and ₹290.

Larsen & Toubro (₹815.9):The stock of Larsen & Toubro witnessed a sharp fall in March this year, conclusively breaking below the key support levels of ₹1,100 and ₹1,000. It had also breached another key support at ₹900 and registered a 52-week low at ₹661 in late March before rebounding higher.

The subsequent corrective rally was capped by the vital resistance at ₹900 in mid-April. Since then, the stock has been in a sideways movement, broadly in the range between ₹790 and ₹900 with a downward bias.

A decisive fall below ₹790 can pull the stock down to ₹750 and then to ₹700. The next support is at ₹661.

A strong move above ₹900 will pave the way for an up-move to ₹950 and ₹1,000 over the medium term. A further breakthrough of the psychological resistance level of ₹1,000 is required to strengthen the up-move and push the stock higher to ₹1,100 which is a vital long-term barrier.

Also, to alter the intermediate-term downtrend, the stock needs to surpass ₹1,100. In that case, it can trend northwards to ₹1,200 and then to ₹1,250 over the long run. You can average the stock in declines with a long-term stop-loss at ₹700.

Send your queries to techtrail@thehindu.co.in

Published on May 24, 2020

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