Market Strategy

Sizzling Stocks : Reliance Capital (Rs 576)

Yoganand D. | Updated on March 19, 2011 Published on March 19, 2011


Following Reliance Capital's announcement of Nippon Life Insurance acquiring 26 per cent stake in Reliance Life Insurance, the stock jumped more than 9 per cent on Monday. This bullish momentum continued and the stock ended the week with 12.5 per cent gains accompanied by extra-ordinary volumes.

Since its February low of Rs 388, the stock has been on a short-term uptrend. After retracing 38 per cent fibonacci retracement level of its prior intermediate-term downtrend (which started from the October 2010 peak of Rs 881), the stock is currently testing key resistance level around Rs 580. Strong breakthrough of this resistance can lift the stock higher and encounter resistance at Rs 630, a significant long-term resistance. Next key resistance is at Rs 690. However, reversal from the current resistance can witness a corrective decline to Rs 510 or Rs 450.

Maruti Suzuki India (Rs 1,158.3)

The stock plunged almost 8 per cent with good volumes in the previous week. Maruti Suzuki has been on a medium-term downtrend since peaking out in November 2010 around Rs 1,600. It is trading well below its 200-day moving average and is now testing its significant long-term support band between Rs 1,150 and Rs 1,170.

Conclusive tumble below this support band will reinforce the downtrend and drag the stock down to Rs 1,100 and then to Rs 1,050 in the medium-term. Nevertheless, reversal from the support level will take the stock higher to Rs 1,250 or Rs 1,350.

To mitigate the downtrend, the stock should rally beyond Rs 1,450 levels.

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