Technical Check: Rectangle breakout in RVNL may lead to fresh buying interest; stock up 100% in 1 year

Rail Vikas Nigam Ltd (RVNL) has rallied by about 100 per cent in the last 1 year compared to over 50 per cent upside seen in the Nifty50. On a year-to-date basis, the stock rallied by about 50 per cent compared to 30 per cent upside seen in the benchmark indies in the same period.  

The stock has been in an uptrend as it rallied a little over 17 per cent in a week. RVNL rose to a fresh 52-week high on Thursday and closed with gains of over 10 per cent.

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The stock with a market capitalization of nearly Rs 7500 cr could rally towards 50 mark in the next 2-3 months which translates into an upside of about 40 per cent from current level of Rs 35.90 (October 21 closing).

Rail Vikas Nigam Limited is under the ownership of Indian Railways, Ministry of Railways, Government of India. It is empowered to act as an Umbrella SPV to undertake project development, resource mobilization etc.

“RVNL was consolidating in a rectangle formation since the beginning of 2021 and now it is breaking out this pattern with heavy volumes,” Santosh Meena, Head of Research, Swastika Investmart Ltd, said.

A rectangle is a continuation pattern that usually depicts a trading range during a pause in the trend. The pattern is formed by combining to comparable highs at the top, and two comparable lows at the bottom. Rectangle are also know as congestion or consolidation zones.

“The counter created a strong base at a cluster of important moving averages that are placed around the 30 mark. MACD is trading above the centerline while RSI is also positively poised,” added Meena.

ADX is trading at the 40 mark to support the strength of the current bullish momentum. The average directional index (ADX) is used verify the direction of the trend.

“The immediate target comes around 42 level while it has potential to move towards 50 mark. On the downside, 32.5-31.5 areas will act as a strong demand zone,” recommends Meena.

Disclaimer: The views/suggestions/advice expressed here in this article are solely by investment experts. Zee Business suggests its readers to consult with their investment advisers before making any financial decision.