Technical Analysis

Tech query: Indian Bank on medium-term uptrend

Yoganand D | Updated on February 06, 2021

I have purchased Indian Bank shares at ₹200. What is the outlook for the stock? Can I hold it for the next one year?

V Natarajan

Indian Bank (₹127.7): The stock of Indian Bank has been on an intermediate-term uptrend since it took support at ₹53 last September. The medium-term uptrend is also up and this trend got accelerated recently as the stock surpassed a crucial resistance at ₹100. Last week, the stock gained 7.5 per cent with above-average volume, extending the uptrend. The stock now trades well above the 21- and 50-day moving averages. There has been an increase in volume over the past five trading sessions.

Nevertheless, the stock now tests a key long-term resistance at ₹130. A decisive break above this hurdle can push the stock northwards to ₹160 and then to ₹200 over the long term. On the downside, if the stock slumps below the immediate support level of ₹110, it can test a support at ₹100, which could hold the stock.

Having said that, a strong tumble below the crucial base level of ₹100 can drag the stock lower to ₹85 and then to ₹78. The next key base is at ₹70. You can average the stock and stay invested with a stop-loss at ₹70.

I hold shares of Tata Motors at an average rate of ₹145 purchased in January 2020. In the recent past, the price has come down after a sharp rally. Should I hold?

Shakil Akhtar

Tata Motors (₹315.9): Following a sharp rally in early January this year from ₹200 to ₹280, the stock of Tata Motors witnessed a corrective fall in the last week of January, which is normal after a rally. Last week also, after surging 15 per cent on Tuesday, the stock began to decline thereafter, but the overall trend is up.

Despite the minor correction, the stock closed the week by gaining 20 per cent. Immediate supports for the stock are at ₹300 and ₹290.

A strong fall below this base can pull the stock lower to ₹260 and then to ₹235 over the short term. The medium-term uptrend that started from the December low of ₹156 will remain in place as long as the stock trades above the key base level of ₹240. A fall below this base can drag the stock down to ₹200. On the upside, an emphatic break above the nearest resistance level of ₹330 can take the contract northwards to ₹340 and then to ₹350 over the short term. A clear break above ₹350 can pave the way for an upmove to ₹400 and then to ₹430 over the long term.

Conversely, if the stock falls below the key long-term support level of ₹200, it can pull the stock down to ₹170 and then to ₹150 levels in the long term. Investors with a long-term perspective can stay invested with a stop-loss at ₹190. You can consider holding the stock and averaging it on declines with a long-term stop-loss at ₹190. Also, consider taking partial profits on rallies with a trailing stop-loss.

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Published on February 06, 2021

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