Technical Check: RSI indicates a trend reversal in this midcap stock; 20% upside possible in 2-3 month
The 27,000 cr market cap Navratna company under the administrative control of the Ministry of Power hit a 52-week high of 168.70 on 18 October and then turned sideways.
REC Ltd has been an underperformer in the last year compared to the 24 per cent upside seen in the Nifty50 in the same period.
The 27,000 cr market cap Navratna company under the administrative control of the Ministry of Power hit a 52-week high of 168.70 on 18 October and then turned sideways.
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The stock fell by about 25 per cent from the recent high recorded in October to take support near Rs 125 on 20 December before bouncing back.
REC managed to reclaim 50-Days EMA placed at Rs 138 which is a positive sign, but it is still trading below 100, and 200-Days EMA, data from Trendlyne suggests.
Technically, the stock is trading near oversold levels; hence, a technical pullback could be on the cards that could take the stock towards Rs 158-165 that translates into an upside of 14-20% from Rs 138.05 recorded on 11 January.
In terms of shareholding, Foreign investors raised their holding from 26.15% in the June quarter to 26.82% in the September quarter. Mutual Funds decreased their holding from 9.39% in the June quarter to 9.29% in the September quarter.
The stock after the decent correction from the peak level of 168 has taken support near 126 levels to form a double bottom formation pattern on the daily chart and has given a significant reversal to improve the bias and sentiment, suggest experts.
“The stock has moved further to breach the previous peak level and also the significant 50EMA level of 137 to strengthen the trend and can anticipate for a further upward move in the coming days,” Vaishali Parekh, Vice President - Technical Research at Prabhudas Lilladher Pvt. Ltd, said.
“The RSI indicator also has indicated a trend reversal from the oversold zone and picked up well to show strength and has potential to rise further, thus justifying our view of a positive bias and recommendation,” she said.
With the chart looking attractive, Parekh suggests investors buy and accumulate this midcap stock for an upside target of 158-165 keeping the stop loss near 130 zones for a time frame of 2-3 months and expecting a decent return from the short-term investment.
(Disclaimer: The views/suggestions/advices expressed here in this article is solely by investment experts. Zee Business suggests its readers to consult with their investment advisers before making any financial decision.)
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