Adani Power
Recently, Adani Power broke through a key bearish trendline on the daily chart, suggesting a potential reversal in momentum from its previous downtrend. Prior to this breakout, the stock had formed a double bottom pattern, a bullish reversal structure that indicates strong support and a potential shift in price direction.
This double bottom was accompanied by a bullish divergence in the Relative Strength Index (RSI), where the RSI moved higher while the price remained low, signalling weakening selling pressure and a possible move upward. This bullish divergence occurred near a significant demand zone and previous breakout range, which further enhances the positive sentiment surrounding the stock.
These technical factors suggest that Adani Power is positioned for a strong upward move. As a result, a long position is recommended in the price range of Rs 655-675, with an upside target of Rs 755. To manage risk, a stop-loss should be placed at Rs 620, with close attention to a daily close below this level to exit the position.
SBI Card
On a weekly chart, SBI Card’s stock consolidated within a range of approximately Rs 680 to Rs 750, signalling a phase where the stock price remained confined within these levels, neither breaking down nor rallying. This period of consolidation occurred near a potential reversal zone, with the lower boundary of the consolidation being around Rs 680. Such zones often indicate that the stock is nearing a point where its trend may shift, either resuming an uptrend or reversing from a prior decline.
During this consolidation, SBI Card formed a triple bottom pattern, a bullish reversal structure that indicates strong support at the lower end of the range. This pattern, coupled with bullish divergence on the daily Relative Strength Index (RSI), further reinforced the likelihood of an upward move. Bullish divergence on the RSI indicates that while the stock’s price may have been declining or remaining flat, momentum was building in the opposite direction, suggesting growing buying pressure.
Following this consolidation, SBI Card successfully broke out of the Rs 750 zone and has sustained above it, confirming the strength of the breakout. The stock is now positioned for further upward movement, with a target price of Rs 900. Investors are advised to take a “buy on dip” approach, entering the stock at levels till Rs 765 for potential upside gains. To manage risk, a stop-loss should be set at Rs 725 on a daily closing basis, ensuring downside protection in case the stock fails to maintain its momentum. This technical setup, backed by the triple bottom pattern, RSI divergence, and the breakout, makes SBI Car a favourable long position for traders and investors.
Siemens
Over the past five trading sessions, Siemens has been consolidating within a narrow range of 6,600 to 6,800, with the stock price hovering near its 100-day exponential moving average (DEMA). This prolonged period of price consolidation indicates a potential base formation, where the stock is stabilising before making a decisive move. The fact that this consolidation is occurring just above its bear trendline (as indicated on the chart) strengthens the likelihood that Siemens is building a strong support base, signalling that selling pressure might be waning.
In the most recent trading session, a notable technical development occurred: the Relative Strength Index (RSI) on the daily chart broke above its previous bear trendline. This breakout in the RSI is a clear indicator of improving momentum, suggesting that buyers are gaining strength and positive momentum is building in the stock. Based on these factors, a long position in Siemens is recommended, with an entry point around 6,800. The price target for this trade is 7,250, offering a strong potential upside. To manage risk, a stop-loss should be placed at 6,575 on a daily close basis.
(Disclaimer: Jigar S Patel is a senior manager of equity research at Anand Rathi. Views expressed are his own.)
First Published: Sep 23 2024 | 6:33 AM IST
