Technical Analysis

Trading pick of the week: Buy ICICI Bank

Akhil Nallamuthu | Updated on August 30, 2020

The stock of ICICI Bank broke out of a resistance last week and went on to close above an important price point of ₹400 on Friday. The breakout following a sideways price action (between ₹340 and ₹390), which had been in place for the past two months, has strengthened the case for the uptrend.

So, the stock is likely to post more gains in the upcoming sessions.

As the stock lost about 50 per cent between February and March 2020 because of the bear trend induced by the coronavirus pandemic, it registered a 52-week low of ₹268.3 in the last week of March. It then looked to recoup at least some of its losses by attempting to reverse the trend quickly.

However, the resistance at ₹400 was too strong then, and as a result, the price began to decline in May. There was another attempt to breach ₹400 in mid-July. But unable to cross the line again, the scrip began consolidating.

Since then, it has been fluctuating within ₹340 and ₹390, and the price band between ₹390 and ₹400 was a formidable hindrance for the stock.

But the bulls finally gathered strength and took out the hurdle last week with an increase in volume. While this is a strong indication of further rally, it is substantiated by the relative strength index (RSI) and the moving average convergence divergence (MACD) indicators in the daily chart, which are in their respective bullish zone.

As the stock is expected to appreciate more, traders can buy with a stop-loss at ₹390. It can potentially rally to ₹440 and ₹450.

Published on August 30, 2020

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