Technical Analysis

Trading pick of the week: Buy Mahindra & Mahindra

Yoganand D | Updated on May 24, 2020 Published on May 24, 2020

M&M office. (File photo)   -  REUTERS

Investors with a medium-term perspective can buy the stock of Mahindra & Mahindra at current levels.

The stock had encountered a key resistance at around ₹590 in February this year and resumed the long-term downtrend that has been in place from the August 2018 high of ₹992.

It was on a medium-term downtrend until it recorded a multi-year low as well as the 52-week low at ₹245.8 in late March.

Subsequently, the stock changed direction, triggered by positive divergence on the daily relative strength index (RSI).

Moreover, the daily as well as the weekly indicators had reached the oversold territory, indicating a change in direction, in late March. Since then, the stock has been in a budding medium-term uptrend that has retraced the 50 per cent Fibonacci retracement level of the previous down leg.

In early May, the stock decisively breached a key short-term resistance at ₹380, which turned into a vital support and provided base last week.

On Friday, the stock surged 4.5 per cent, accompanied by above-average volume, reinforcing the bullish momentum.

In the past week, it jumped 11.8 per cent with good volume. The daily RSI has entered the bullish zone from the neutral region and the weekly RSI is charting higher in the neutral region.

Further, the daily price rate of change indicator hovers in the positive terrain, implying buying interest. The medium-term outlook is bullish for the stock.

It can continue to trend upwards and reach the price targets of ₹460 and ₹480 with a minor pause at ₹450. Traders can buy with a stop-loss at ₹395.

Published on May 24, 2020
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