The Stock is Praj Ind.
Let us make few common sense observations:
1. The stock has a solid resistance at 100-102. Every time, the stock rallies to that level it sells off.
2. The stock pretty viciously sold off from 102 this time and most of the selling has happened in July.
3. The stock is right now trading near 81-82 levels…a level from where stock has always bounced this year
Source: Chartalert.com
It means if one is fundamentally bullish on the stock, then the stock is right at the support level and can be bought. But what about the selling in July. Can we trust the support? Let us look for more evidence. Here’s the weekly chart
Source: Chartalert.com
The stock seems to have formed an Inverted Head and Shoulder pattern, which is a very bullish pattern. The stock seems to have completed the pattern and usually if stock rallies, then, this time, it will not only rally to 100-102 but even break that.
Now let’s sum up the observations –
One View
Praj Ind has been bouncing off from levels of 81-82 since March 2016. The stock is right at the level. It makes the stock a buy on the assumption that stock will keep doing the same thing. If the stock fails to do so, then one should exit on any close below 81. It’s a 20% trading opportunity with limited downside risk of SL triggering below 80 on closing basis.
But the stock is not a Trend Opportunity
Praj Ind chart does not inspire any confidence right now considering how its trading in a range. Just look at the stock performance over last 10 months. It’s not a technical buy. Technical traders chase momentum and stocks that are firmly in a trending motion. Praj is a good stock to enter for people who are fundamentally bullish on the stock and are looking to buy at good low-risk levels. Remember Technical Trend Trading is about Buying High and Selling Higher and Praj does not fit in there
Let me know your views
Disclaimer – The state of the market notes is Deepak’s perspective on the market. The column is purely for educational purpose. Nothing contained herein is a solicitation to trade or a recommendation of a specific trade. By reading this publication you agree to make no trade relying in whole or in part on the comments of the writers