Reliance Infrastructure Limited
Suggestion: Buy, Target Rs. 825; SL Rs. 780
Last Price 789.90
Figure 1 shows the price movement for Reliance Infrastructure with 3 major SMAs that help in identifying the current trend. The 3 SMAs being 4 (brown), 9 (blue) and 18 (orange) days respectively. The SMA(4) line is well above all other SMAs, and SMA(9) is above the SMA(18) line; this means that the stock is currently in the Bullish phase. The gap between the 3 SMAs is large indicating that the phase will continue for some time. This is further confirmed by the help of other tools.
But before identifying the current phase, it is important to decide which tools to use. This is done with the help of Fig. 2, which shows the ADX graph for Reliance Infrastructure. The current value being 57.47 indicates that the stock is in trending phase and thus trned followers can be used.
Bollinger band is drawn around the price line with SMA(20) as the base line. They further confirm the presence of Bulls, as the price is moving in the upper half (above the base line). Thus the Bullish trend is confirmed, but still nothing is yet known about the strength of the trend, which is identified below with the help of MACD Histogram.
MACD histogram (fig. 4) is showing a completely different picture. As per this graph, the Bullish trend has weakened a lot, but there are still chances that the trend might recover as it recovered earlier (around a week back – as shown in fig 4). The above tools and absence of trend reversal patterns further support that the Bulls will recover in the coming sessions.
Thus, the Bulls are expected to take the stock prices further up in the coming sesions, and thus it will be beneficial to buy the stock right now with a target price of Rs. 825. However, due to minor signals of weakening trend, it is advised to buy a Stop Loss at Rs. 780.
Note: SMA(n) means Simple Moving Average of daily price of n days
ADX – Average Directional Index
MACD – Moving Average Convergence/Divergence