Coal India in reversal mode

The stock has been trending up over the last two weeks, with good volumes

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

I am a long term investor in Bank of Baroda & Coal India. Please discuss the technical levels for these two stocks.

Yerava Suneeta

Bank of Baroda (₹145.2): After testing a key resistance at ₹200 in May 2017, the stock of Bank of Baroda reversed direction. Since then, the stock has been in a medium-term downtrend. While trending down, the stock decisively breached its key support at ₹180 and ₹160 levels. However, in early September the stock found support at ₹135. Triggered by positive divergence in the daily relative strength index, the stock started to trend upwards. Last week, the stock gained 6 per cent breaching its 21-day moving average.

This indicates short-term trend reversal on the cards. Investors with short as well as medium-term perspective can buy the stock at current levels with a stop-loss at ₹130. The stock can extend its rally and test resistances at ₹160 in the coming weeks. Strong breakthrough of this barrier is needed to strengthen the uptrend and take the stock higher to ₹170 and ₹180 levels in the medium term. On the other hand, if the stock conclusively breaks the immediate support at around ₹135, it can bring back selling pressure and this will also confirm resumption of the downtrend. Next key supports to note are at ₹120 and ₹110. Investors should desist from taking fresh long positions on a strong fall below ₹135 levels.

Coal India (₹259.9): The stock of Coal India has been in a long-term downtrend since August 2015 peak of ₹447. In August 2016, the stock failed to surpass the key resistance level of ₹340 and continued its downtrend. Since then, the stock has been in an intermediate-term downtrend. However, significant long-term support in the band between ₹240 and ₹250 arrested the stock’s decline in August this year. After testing this support band for more than a month, the stock began to trend upwards, triggered by positive divergence in weekly relative strength index and price rate of change indicator. Over last two weeks, the stock has been trending up backed with good volumes. Moreover, the stock has emphatically breached its 21- and 50-day moving averages and trades well above them.

The daily relative strength index feature in the bullish zone, supporting the ongoing bullish momentum. Further, the buying interest is evident as the daily and weekly price rate of change indicators hover in the positive territory. Investors with short as well as medium-term horizon can buy the stock at current levels with a stop-loss at ₹240 levels. The stock can continue to trend upwards and reach the price targets of ₹270 and ₹285 levels in the short to medium term. Next key resistances are at ₹300 and ₹320 levels.

Significant medium-term resistances to note are pegged at ₹340 and ₹370 levels. Conversely, strong plunge below the long-term base zone between ₹240 and ₹250 can drag the stock down to new lows. In such a scenario, the stock can find supports at ₹210 and ₹220 levels. To alter the long-term downtrend, the stock needs to decisively move beyond the key resistance level of ₹340. Long-term targets are ₹370 and ₹400 levels.

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