- Looking at the weekly chart, stock has been in an uptrend since mid February, 2016 and formed a ‘Higher Top Higher Bottom formation’. In that optimism, stock registered a high of around 148 (March 03, 2017).
- Subsequently, stock witnessed decent profit booking which led to a gradual correction towards 125. The level of 125 coincides with the multiple support zone. First, upward sloping trend line joining from February 2016 low, the previous weekly swing high on closing basis (change of polarity rule) and the 50% retracement of its entire move from the bottom of 105 to 148.
- Weekly chart formed a ‘Bearish Divergence’ pattern and the impact of the said pattern was seen in terms of gradual correction from 148 to 125. Now, we are seeing a formation of ‘Positive Reversal’ near the upwards sloping trend line.
- Also, the today’s weekly candle indicates the possible Bullish Hammer pattern. However, it is prudent to wait for a confirmation in terms of closing basis.
- The 9-45 EMA on monthly as well as on the weekly chart is still positive indicate the primary trend is still up.
Combining the above technical evidences, we expect stock to resume its uptrend and therefore recommend traders to buy this stock at current level of 130.40 with an upside price target of 164. Strict stop loss should be placed at 113 below which the bullish view will be voided.
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- Buy NMDC at 130.40, Target 164 & SL 113.
- Return to risk ratio: 1:2.
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