Wednesday, July 13, 2011

Technical Analysis - Mahindra Forgings

We recommend a buy in the stock of Mahindra Forgings from a short-term perspective. It is seen from the charts of the stock that it was on an intermediate-term down trend from its October 2010 peak of Rs 115 until its March low of Rs 56. However, the stock bottomed out triggered by positive divergence in daily relative strength index and moving average convergence divergence. Since March, the stock has been on a medium-term uptrend. In late March, the stock breached its intermediate-term downtrend-line and its 50-day moving average showing initial signs of bullishness.

On Tuesday, the stock emphatically broke through its medium-term key resistance zone between Rs 76 and Rs 80 by jumping almost six per cent with extraordinary volumes. The daily RSI is featuring in the bullish zone and weekly RSI is inching higher in the neutral region towards the bullish zone. Daily MACD has signalled a buy and is hovering in the positive territory indicating upward momentum. Both daily and weekly price rate of change indicators are featuring in the positive territory implying buying interest.

Considering the stock's significant resistance breakthrough and that its medium-term uptrend-line is in tact, we are bullish on the stock. We anticipate it to move higher and reach our price target of Rs 85.5 or Rs 88 in the days ahead. Traders can consider buying the stock with stop-loss at Rs 80

Our recommendation :

The BSE Metal Index has been under performing with most of the prominent stocks hovering near the 52 week lows. This indicates extreme weakness, avoid the sector for now. If they fall by 15-20% start staggered buying.

The stock is getting support around 60 levels and facing head winds at 85. Buy at support levels to sell are 80


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