Technical Analysis

Stock query: VA Tech Wabag on recovery mode

Yoganand D | Updated on September 13, 2020 Published on September 13, 2020

The stock is on short-term correction, with a support at ₹182 cushioning the decline

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

I purchased VA Tech Wabag shares around four years ago, with an average buy price of ₹774. Please advise what I should do now — hold or sell.

Madhu

VA Tech Wabag (₹193.6): The stock of VA Tech Wabag has been on an intermediate-term uptrend since recording a 52-week low at ₹73 in late March this year. While trending upwards, the stock decisively breached a key long-term resistance at ₹160 in late August.

However, the rally encountered a resistance at ₹235 and the stock began to witness a corrective decline. Over the past two weeks, the stock has been on a corrective down-move, and the significant support at ₹182 is cushioning the decline.

A slump below this base can pull the stock lower to ₹160.

A further decline below this support will drag the stock lower to ₹140.

That said, a strong plunge below this level will alter the intermediate-term uptrend and drag the stock lower to ₹120 and then to ₹100 over the medium term.

On the upside, if the stock moves beyond the crucial resistance level of ₹235, it can be pushed northwards to ₹250 and then to ₹300 over the long run.

The next significant long-term resistance is placed at ₹350. The long-term downtrend will remain in place as long as the stock trades below ₹450 levels. The current uptrend is considered as a recovery for the stock.

You can consider averaging the stock and hold with a stop-loss at ₹140. Failure to move beyond ₹350 will be a cue for taking partial profits. Investors with a long-term view can hold the stock with a stop-loss at ₹140.

I purchased shares of Rane Brake Lining at ₹901. Please let me know your view on the stock for the medium as well as the long term. Please advise whether I should hold, sell or average.

TS Narayanaswamy

Rane Brake Lining (₹582.2): The stock of Rane Brake Lining has been on an intermediate-term uptrend since registering a 52-week low at ₹294 in late March this year. It had emphatically breached a key long-term resistance at ₹500 in late June and continued to trend northwards. Nevertheless, the stock met with a vital resistance at ₹660 in late August and started to correct.

As long as the stock trades above ₹540, the short-term uptrend will remain in place. The intermediate-term uptrend will stay intact above ₹400.

You can stay invested and average the stock on declines with a stop-loss at ₹480.

A conclusive break above ₹660 can push the stock higher to ₹700 and then to ₹750 over the long term. The subsequent resistances are at ₹800 and ₹900.

Having said that, to alter the long-term downtrend that has been in place since late 2017 — from the high of ₹1,450 — will remain valid as long as the stock trades below the psychological resistance level of ₹1,000.

Send your queries to techtrail@thehindu.co.in

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Published on September 13, 2020
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