Technical Analysis

Stock query: Shriram Transport faces major hurdle ahead

Yoganand D | Updated on November 15, 2020

A conclusive break above ₹920 will strengthen the medium-term uptrend

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

I would like to invest in the shares of Shriram Transport Finance Company at the current price. Kindly advise.

TVS Prakash Rao

Shriram Transport Finance Company (₹872.3): The stock has been on a long-term downtrend since registering an alltime high at ₹1,625 in April 2018.

In February this year, the stock encountered a key resistance in the band between ₹1,300 and ₹1330 and witnessed a sharp fall, breaking below key supports at ₹,1000 and ₹800.

But the stock found its base in late March, recording a 52-week low at ₹428. Subsequently, it changed direction, and has since been trending higher.

In the first week of November, the stock jumped 22 per cent with good volume, breaking above the significant resistance at ₹800 that had limited the upside in April and August.

Although this breakout has strengthened the medium-term uptrend, the long-term trend will continue to remain bearish as long as the stock trades below the crucial resistance level of ₹1,200.

The stock has a key resistance ahead at ₹920. A conclusive break above this barrier will strengthen the medium-term uptrend and take the stock higher to ₹1,000.

A further rally above the psychological barrier of ₹1,000 can pave the way for an upmove to ₹1,120 and then to ₹1,200 over the medium term.

A conclusive breakthrough of ₹1,200 can alter the long-term downtrend and take the stock northwards to ₹1,300 and then to ₹1,400 over the long run.

Having said that, failure to move beyond ₹1,000 can keep the stock consolidating sideways for a while.

A fall below the immediate support level of ₹800 can bring back selling interest and drag the stock down to ₹710 and then to ₹600 over the medium term.

You can buy on corrective declines with a long-term stop-loss at ₹640.

Kindly advise whether to hold shares of GMM Pfaudler bought at a price of ₹3,900.

Ganesh MS

GMM Pfaudler (₹3,426): After registering a new high at ₹6,913 in mid-August this year, the stock reversed direction.

Since then, it has been on a medium-term downtrend.

While trending down, the stock decisively breached key supports at ₹5,000 and ₹4,000 in September.

It is now range-bound between ₹3,300 and ₹4,000.

Consider exiting the stock if it fails to move beyond the upper boundary of ₹4,000 or falls below the lower boundary ₹3,300.

A decline below ₹3,300 can drag the stock down to ₹3,000 and then to ₹2,500.

The supports below ₹2,500 are at ₹2,500 and ₹1,500.

On the upside, a conclusive break above ₹4,000 can take the stock northwards to ₹4,500 and then to ₹5,000 over the medium term. The resistances thereafter are at ₹5,450 and ₹6,000.

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Published on November 15, 2020

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