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The Government approving the scheme for financial restructuring of the debt of seven State electricity boards (SEBs) early last week triggered a rally in this power stock that helped it gain as much as 8 per cent on Monday. For the week, the stock gained more than 12 per cent with good volumes.
After marking a life-time low at Rs 36.8 on August 30, the stock changed its direction. This reversal was triggered by positive divergence in weekly relative strength index and moving average convergence divergence indicator. The stock has been on a short-term uptrend since then. But, the stock is now poised at key resistance level at Rs 53 and is testing it. A decisive jump above this resistance level will pave way for a medium-term up move to Rs 62. Subsequent resistance for the stock is positioned at Rs 72.
Inability to rally above Rs 53 will pull the stock down to Rs 48 in the near-term. Next support is at Rs 46. Only a strong fall below Rs 42 will mar the stock's present uptrend and drag the stock down to Rs 39 or Rs 37 in the medium-term.
Gujarat Gas Company (Rs 342.5)
Testing the stock’s immediate key support at Rs 290 during August and September 2012, the stock skyrocketed 17 per cent last week following the company’s dividend declaration. On September 25, the company announced that the board had declared the payment of interim dividend of Rs 7 per equity share of Rs 2 each. In May 2012, the stock found support at Rs 270, which coincides with its 50 per cent fibonacci retracement level of its prior uptrend, and started trending upwards. There has been an increase in daily volumes over the past four trading sessions. While trending higher, the stock breached its 21 as well as 50-day moving averages and a significant resistance at Rs 317. Nevertheless, the stock is testing important resistance and 200-day moving average at Rs 340. The stock's daily indicators are in the overbought levels. Moreover, it is hovering well above the upper boundary of its daily Bollinger Bands implying an overbought counter. Hence, we don't rule out a near-term correction in the stock price.
Strong breakthrough of Rs 340, following the correction, will take the stock higher to Rs 370 and to Rs 385 in the forthcoming weeks. Next important resistances are pegged at Rs 414 and Rs 430. Conversely, tumble below Rs 317 will pull the stock down to Rs 290 or even to Rs 270 in the medium-term.
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