Technical Analysis

Tech query: Nestle India on short-term decline

Yoganand D | Updated on January 23, 2021

I have bought Nestle India at ₹18,600. Can I hold it for a long term?

Selvam Karthik

Nestle India (₹17,580.1): The stock of Nestle India recorded a 52-week high at ₹18,821 on BSE in mid-December 2020 and started to decline. This reversal was triggered by negative divergence on the daily relative strength index (RSI).

The stock has been on a short-term downtrend over the past one month. It now trades above a key support at ₹17,500. An emphatic fall below this base can pull the stock down to the next support level of ₹17,000 over the short term.

A plunge below 16,500 will alter the medium- term uptrend that has been in place from the September 2020 low at around ₹15,100 levels. Key supports below ₹16,500 are placed at ₹15,500 and ₹15,100.

Further decline below the crucial medium-term support level of ₹15,100 will strengthen the bearish momentum and pull the stock lower to ₹14,500 and then to ₹14,000 over the medium term. You can consider holding the stock and averaging it at lower levels with a long-term stop-loss at ₹13,900 levels.

On the upside, a decisive rally above the immediate resistance level of ₹18,000 can push the stock northwards to ₹18,500 and then to ₹19,000 over the short-to-medium term. A clear breakthrough of the barrier at ₹19,000 can pave for an up-move to ₹20,000 over the long run.

Please provide the prospects for the shares of Suven Life Sciences purchased at ₹85, from a short-, medium- and long-term perspective.

Sudhakar Reddy

Suven Life Sciences (₹80.3): The stock of Suven Life Sciences moved out of a key long-term resistance level of ₹60 in early December 2020 and recorded a 52-week high at ₹109 in late December. Thereafter, it began to decline, and has since been on a short term downtrend. Now, the stock tests a support at ₹80.

A strong fall below this base can pull it down to the next support level of ₹70 and then to ₹60 over the medium term. However, a strong plunge below the long-term base level of ₹60 will bring back selling interest and drag the stock lower to ₹50 and then to ₹40. The next supports are at ₹31 and ₹20.

Conversely, if the stock moves beyond the immediate resistance level of ₹90 and then to ₹94, the uptrend will regain momentum, which can take the stock northwards to ₹100 and then to ₹110. As the stock sometimes turns illiquid, it is advisable to invest with caution in this small- cap pharma stock. Consider exiting the stock on rallies with a stop-loss at ₹70.

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Published on January 23, 2021
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