RPOWER: Weak Bulls, target – Rs. 142

Reliance Power

Symbol: RPOWER

Suggestion: BUY; Target price – Rs. 142

Fig 1: Price movement bar chart - Reliance Power

The price of Reliance Power is currently moving in a trend (figure 1), but on a close look it can be identified that the price is not following the trend line perfectly as lot of deviations exist. One point to note is that the overall movement is upward i.e. the major trend is Bullish with minor Bullish & Bearish trends. Any decision of whether to buy or sell the stock cannot be made just by looking at this chart, as the trend is not pretty clear; and thus other tools are used as described below.

Fig 2: ADX chart - Reliance Power

As shown in figure 2, the ADX value of Reliance Power is high enough (=47.96), therefore assuring the presence of the trending phase. Thus, the trend follower tools can be used.

Fig. 3: MACD chart - Reliance Power

Currently, the MACD line (figure 3) is also above the EMA(9) line, therefore further supporting the trend lines (of figure 1) that the Bullish phase is present. It should be noted that the gap between the MACD and EMA(9) line is very small, and thus indicating that Bulls are getting weak. Therefore, there are chances that Bears might get a lead in the coming sessions.

Fig 4: Bollinger Bands - Reliance Power

In order to further confirm the presence of Bullish phase, Bollinger Bands are drawn with SMA(20) as the base line (shown in figure 4). As can be seen, the price is moving close to the upper band therefore approving the Bullish phase. But this also increases the chances of a trend reversal in the coming sessions. Trend might reverse if the price goes below the SMA(20) line and is not able to cross it again; thus care has to be taken after investing.

It is advised to the readers to buy the stock with a target price of Rs. 142. It should be kept in mind that the current trend is already weakening; therefore care should be taken after investing.