Technical Analysis

Weekly trading guide: ITC cracks a critical resistance

Akhil Nallamuthu | Updated on December 12, 2020 Published on December 12, 2020

ITC (₹216.3)

After making multiple attempts to crack the resistance at ₹200 since June this year, bulls have finally gone overboard — so the stock rallied past that level last week. While the early build-up of the current rally looked solid, the uptrend seemed like losing steam as the price action was largely sluggish in the past two weeks.

However, the stock gathered enough momentum and closed the week above the key barrier of ₹200, opening the door for further strengthening. The scrip advanced above the 200-day moving average and the relative strength indicator on the weekly chart has entered the bullish zone, indicating that the medium-term trend of the stock has turned positive.

Hence, traders can buy on declines with a stop-loss at ₹200 for targets of ₹235 and ₹242.

DMart (₹2,685.1): Validates bullish continuation pattern

The stock of Avenue Supermarts (DMart) saw a breakout of ₹2,500, which resulted in the scrip recording a fresh lifetime high of ₹2,755 last week. The resistance of ₹2,500 had been preventing the stock from moving beyond this level since February, meaning the breakout is very significant and can now attract good amount of buying.

In addition, the weekly chart shows that the stock has confirmed an ascending triangle pattern — a trend-continuation pattern. Since the trend prior to the formation of this pattern was bullish, the stock is highly likely to witness another move northward.

Considering these factors, traders can approach with a positive inclination and go long on the stock on dips with a stop-loss at ₹2,500. Look for targets of ₹2,900 and ₹3,000.

Marico (₹414.9): Breaches two-year resistance

Since June this year, the stock of Marico has largely been vacillating in the band between ₹345 and ₹385. This is a familiar range for the stock as it had been fluctuating between these levels for most part of 2019 as well.

However, the scrip got out of the range in the first week of this month and breached a key barrier of ₹400 and went on to register a fresh all-time high of ₹416.2 on Friday. Notably, the resistance at ₹400 had been arresting the rally for the past two years — thus, the breakout has opened more room on the upside.

A bullish flag pattern on the daily chart means the stock might see a sharp rally during the forthcoming sessions. Taking the above factors into account, traders can buy the stock with a stop-loss at ₹385 for possible a target of ₹450.

PNB (₹40.5): Confirms bullish reversal pattern

Even as the broader market recovered from the March lows, the stock of Punjab National Bank slid beyond March and registered a low of ₹27.6 in May. There was a recovery post that, but was limited to the price band of ₹37 and ₹40. Subsequently, bears gained strength and the price declined to mark a fresh 52-week low of ₹26.3 in October.

However, the stock then swiftly reversed the trend, but this time with strong build-up in volume. In fact, the volume doubled last week compared with the preceding week, and the scrip broke out of the trend-defining level of ₹40.

The breach of this level has confirmed the double bottom chart pattern, hinting at a possible bullish trend-reversal. So, traders can initiate fresh long positions with a stop-loss at ₹36; target can be ₹50.

HDFC AMC (₹2,838.6): Uptrend resumes post-correction

The recovery from March lows faced a stumbling block in April wherein the stock of HDFC AMC was unable to pass through the resistance at ₹2,775. The 38.2 per cent Fibonacci retracement level of the previous downtrend lies at ₹2,690 and, thus, the price area between ₹2,690 and ₹2,775 was a resistance band.

After a couple of failed attempts to break out of these levels, the price gradually declined and made a low of ₹2,070 in late September. But then the scrip gradually attained momentum and consequently crossed over the resistance at ₹2,775 last week.

Since the breakout is accompanied by considerable volumes, the likelihood of a rally from here is high. Hence, buy the stock with a stop-loss at ₹2,670. The stock can appreciate to ₹3,150.

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Published on December 12, 2020
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