Bata India Limited
Suggestion: Buy, Target price Rs. 110; Stop loss at Rs. 125
Last Price 121.10
The stock price of Bata India has recently started following a downward moveing trend, as shown in figure 1. Looking at the graph, one can easily figure out that the price is not following this trend strictly, and thus it cannot be said that the price will follow this particular trend in the coming sessions. It is better to call these lines as a projections or rough estimates instead of trend lines.
Bollinger Band gives a more clearer picture of the current trend. Bollinger band for Bata India is shown in figure 2, with SMA(20) as the base line. As can be seen, the price has started falling and is now going below the base line. This indicates the starting of the Bearish phase. But this particular movement is not a strong indicator that marks the starting of the Bear phase. And thus in order to confirm, other tools have to be used.
In order to decide which tools to use for further analysis, ADX for Bata India is drawn, as shown in figure 3. The current value of ADX is 26.48, which means that oscillators will give a better idea about the price movement in coming sessions.
As the ADX indicated that oscillators have to be used for further analysis, therefore RSI or Relative Strength Index is drawn for Bata India (as shown in fig. 4). With the help of two vertical black lines, it is shown that how the price and RSI are moving in different directions – price is falling while RSI is moving upward. This is one of the strongest indications given by RSI – marking the starting of the Bear phase.
Therefore, using RSI it is confirmed that the Bear phase has started and thus it is advised to the investors to sell the shares and later on buy at a cheaper price, with the target being Rs. 110. Also, a stop loss at Rs. 125 is advised.