Technical Analysis

Chart Focus - Butterfly Gandhimathi Appliances: Buy

Yoganand D | Updated on May 19, 2019 Published on May 19, 2019

Investors with a medium-term horizon can buy the stock of Butterfly Gandhimathi Appliances (₹176.6) at the current levels. The stock found long-term support in the band between ₹150 and ₹160 last week and registered a 52-week low at ₹153. It is showing signs of trend reversal. The long-term support had provided a base for the stock in 2017 and 2018 and the stock reversed direction. The long-term downtrend that has been in place since marking a new high at ₹661 in January 2018 appears to have come to a halt.

 

Both the medium and short-term trends are down. But the long-term support mentioned above is cushioning the stock. Moreover, the daily and weekly relative strength indices are showing positive divergence, indicating that trend reversal is on the cards. The stock gained 6 per cent on Friday, breaching a key resistance at ₹170. Also, it managed to close above the 21-day moving average line. The daily RSI has entered the neutral region from the bearish zone and continues to trend upwards. The weekly RSI is recovering from the oversold territory.

Besides, the daily price rate of change indicator has entered the positive territory, implying buying interest. Taking a contrarian stance, the medium-term outlook is bullish for the stock. It can continue to trend upwards and reach the price targets of ₹195 and ₹205 in the medium term. Buy with stop-loss at ₹163.

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