Technical Analysis

Stock query: Larsen & Toubro is trending downwards

Yoganand D | Updated on March 01, 2020

Last week, the stock plummeted 7.6%, conclusively breaking a vital support at ₹1,270

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

I hold shares of Larsen & Toubro purchased at ₹1,320. What is the short- to medium-term view?

Sundeep Singh

Larsen & Toubro (₹1,183): The stock of Larsen & Toubro registered a new high at ₹1,606.7 in May 2019. The key resistance between ₹1,500 and ₹1,600 limited the upside in July and in September 2019. Subsequently, the stock changed direction and started to decline.

Since last July, it has been on an intermediate-term down-trend. It conclusively breached a key medium-term support at ₹1,400 as well as the 200-day moving average in November 2019. Thereafter, the stock continued to trend downwards and found support at ₹1,270 in December.

Last week, it plummeted ₹97, or 7.6 per cent, conclusively breaking the vital support at ₹1,270 levels. Moreover, the stock has decisively breached a key long-term support in the ₹1,250-1,270 band.

The short- as well as the medium-term outlook appears to be bearish for the stock. However, a near-term corrective rally to ₹1,270 is possible. Inability to move beyond this resistance can pull the stock down to ₹1,150 and then to ₹1,100 in the short term. The subsequent supports below ₹1,100 are at ₹1,050 and ₹1,000.

A conclusive plunge below ₹1,000 will mar the long-term uptrend that started from the 2016 low of ₹677 levels. In that scenario, the stock can head southwards to ₹900 in the long term. You can exit the stock if the stock fails to move beyond ₹1,270, and consider buying at lower levels.

Investors with a long-term perspective can stay invested and consider averaging in declines, with a a stop-loss at ₹860 levels.

On the upside, a decisive break above ₹1,270 can push the stock higher to ₹1,350 in the medium term. To alter the intermediate-term downtrend, the stock needs to break out of a significant resistance at ₹1,400.

The next resistances are at ₹1,460 and ₹1,500.

I bought Canara Bank shares at ₹217, and the stock is declining now. Should I sell or hold it?

KBD Prasad

Canara Bank (₹144): Last week, the stock of Canara Bank nose-dived 16.6 per cent and recorded a multi-year low at ₹141.

With the recent sharp fall, the stock appears to have resumed its long-term downtrend that has been in place from the high marked at ₹820 in 2010.

Both the daily oscillator and the indicator are featuring in the oversold territory, and a corrective rally can’t be ruled out this juncture.

The stock can test an immediate resistance at ₹151. A decisive break above this level can take it upwards to ₹171 in the short-to-medium term.

A further rally above ₹171 can extend the up-move to ₹180 and then to ₹200 over the medium term. Failure to break above ₹171 can keep the stock consolidating sideways in between ₹140 and ₹171 for a while.

On the downside, a fall below ₹140 can drag the stock down to ₹130 and then to ₹112 over the medium term horizon. If you have an appetite for high risk, you can consider averaging the stock with a stop-loss at ₹130.

Send your queries to techtrail@thehindu.co.in

Published on March 01, 2020

Follow us on Telegram, Facebook, Twitter, Instagram, YouTube and Linkedin. You can also download our Android App or IOS App.

This article is closed for comments.
Please Email the Editor