Technical Analysis

Vedanta poised above key long-term base

Yoganand D | Updated on March 29, 2020 Published on March 29, 2020

Emphatic break below long-term support zone can drag it down to ₹50 over medium term

Here are the answers to readers’ queries on the performance of their stock holdings.

Can I buy Vedanta at current levels? Kindly mention the prospects of the stock.

TVS Prakash Rao, Suneeta

Vedanta (₹63.8): The stock of Vedanta (VEDL) is in a downtrend across all-time frames — long-, medium- and short-term. In mid-January, the stock encountered a key long-term resistance between ₹160 and ₹166.

Subsequently, it resumed the primary down trend, and has been in a medium-term downtrend since then. While trending down, the stock decisively breached a key support at around ₹130 in late February and plummeted sharply, breaking the next support at ₹100. The short-term trend is down.

The stock trades well below its 50- and 200-day moving averages. After recording a 52-week low at ₹61.7 on March 23, it has been moving sideways. The stock currently trades above a significant long-term support in the ₹58-60 zone, which coincides with the troughs formed in 2016 and 2008.

An emphatic break below this long-term support zone can drag the stock down to ₹50 and then to ₹40 over the medium term.

The next vital supports are at ₹35, ₹30 and ₹28.

That said, the daily relative strength index (RSI) is displaying a positive divergence, indicating that short-term trend- reversal is on the cards.

Moreover, the weekly RSI is hovering in the oversold territory, implying a corrective rally.

Such a rally can take the stock higher to the immediate resistances at ₹70 and then to ₹80.

A strong break above the crucial resistance at ₹86 is needed to prolong the corrective rally to ₹100 in the medium term.

Investors with a medium-term view can buy above ₹86 with a fixed stop-loss. I

nability to move beyond ₹86 will keep the stock consolidating sideways for a while. Alternatively, given the current market volatility, if the stock tumbles below ₹58, investors with a long-term perspective can accumulate in declines with a long-term stop-loss at ₹35.

I have bought shares of Karur Vysya Bank at ₹80. Should I hold or sell, what is the outlook.

J Partha Sarathy

Karur Vysya Bank (₹20.7): The stock of Karur Vysya Bank is also in a downtrend across all-time frames. In late January, it decisively breached a vital support at ₹55 and continued to trend downwards, witnessing a sharp decline.

The stock had breached key supports at ₹40 and ₹30. It recorded a multi-year low at ₹18.1 last week, and tests a key support at ₹20. The next key support is at ₹15.2, which is an early 2009 low.

Supports thereafter are pegged at ₹13 and ₹10.

Both the daily as well as the weekly indicators and oscillators feature in the oversold territory.

There has been an increase in daily volume since early March.

You can consider averaging the stock in declines with a stop-loss at ₹15 and exiting the stock in rally.

Only a strong rally above ₹46 will alter the medium-term downtrend and take the stock higher to ₹50 and ₹55 levels in the long run. Short- term resistances are at ₹30 and ₹40.

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Published on March 29, 2020

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