Wednesday, July 13, 2011

Technical Analysis - Bharat Forge

We recommend a sell in the stock of Bharat Forge from a short-term perspective. It is evident from the charts of the stock that after marking an all-time high of Rs 412 in early December 2010, the stock changed its direction and started its decline. Since then, it has been on an intermediate-term downtrend. The stock encountered significant resistance around Rs 365, following a corrective up move between late February and early April. This resistance also coincides with 61.8 per cent fibonacci retracement level of its prior down leg. Subsequently, the stock resumed its downtrend and breached its 200-day moving average.

Short-term trend is also down. On Monday, the stock conclusively breached its 50-day moving average and has strengthened its downtrend. The daily relative strength index is featuring in the bearish zone and weekly RSI is on the brink of entering this zone from the neutral region. Also, both daily as well as weekly moving average convergence divergence indicators are hovering in the negative territory signalling downward momentum.

We are bearish on the stock from a short-term horizon. We expect its decline to prolong until it reaches our price target of Rs 314 or Rs 305 in the upcoming trading sessions. Traders with short-term perspective can consider selling the stock with stop-loss at Rs 334.

Our views :

Buy below Rs.300 for a target price of 360 holding period 4-6 months.


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