Technical Analysis

Trading pick of the week: Sell Mahanagar Gas

Yoganand D | Updated on July 12, 2020 Published on July 12, 2020

Investors with a medium-term perspective can sell the stock of Mahanagar Gas at current levels. It had taken support at around ₹700 in late March and had been on a medium-term uptrend until it encountered a key resistance at ₹1,095 in mid-June.

A key resistance in the band between ₹1,090 and ₹1,110 acted as a crucial barrier and limited the upside for the stock. Triggered by negative divergence on the daily relative strength index (RSI) and the daily price rate of change indicator, the stock reversed direction in late June and started to decline.

It initially breached the medium-term uptrend that had been intact since late March. Thereafter, the stock continued to trend downwards and conclusively breached the key base at ₹1,000 as well as the 200-day moving average; it declined 4.2 per cent on Friday.

Last week, the stock tumbled 9.5 per cent, witnessing selling pressure.

It trades well below the 50- as well as the 200-day moving averages.

There has been an increase in daily volume over the past week.

The daily RSI has entered the bearish zone from the neutral region and the weekly RSI is charting downwards from the neutral region. Besides, the daily price rate of change indicator features in the negative territory, implying selling interest. In the weekly chart, the indicator is on the brink of entering the negative terrain from the positive.

The stock can continue to trend downwards and reach the price targets of ₹880 and ₹850 over the medium term with a minor pause at around ₹900. Traders can sell with a stop-loss at ₹1,025.

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Published on July 12, 2020
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