Technical Check: RSI indicator indicates a trend reversal in this smallcap; experts see over 20% upside, recommends buy

Greenply Industries Ltd is up over 70 per cent so far in 2021 despite the recent sell-off versus over 23 per cent upside seen in the Nifty50 in the same period.

The share price of this small cap company with a market capitalization of Rs 2500 cr fell sharply after hitting a high of Rs 254.25 on 8 November. The stock fell more than 25 per cent to find support near Rs 188.75 on 29 November.

The stock has started its recovery but still trades below crucial short-term moving averages of 30, 50-Days EMA. However, it is trading well above the long-term moving averages which is a positive sign.

Experts are of the view that a break above the 50-Days EMA placed at 207 can add to further strength in the stock.

The Relative Strength Index (RSI) is indicating a potential trend reversal that could take it towards Rs 240-255 that translates into an upside of 25 per cent from Rs 203 recorded on 28 December.

RSI is a momentum indicator that evaluates whether the stock is in an overbought or oversold zone depending on the recent price action.
 

The stock has been trading in an Ascending Trending mode as indicated by the daily chart and with regular swings, it has given an opportunity to investors to gain profits with entry at the correct levels.

“Recently, the stock has witnessed a decent erosion from the peak level of 254 and has currently reached near the trendline support of 190 levels indicating signs of bottoming out and giving a trend reversal,” Vaishali Parekh, Vice President -Technical Research at Prabhudas Lilladher Pvt. Ltd, said.

“The significant 200DMA level of 196 is nearby the support zone where the stock has shown respect and picking up to improve the bias. A decisive move past the important 50EMA level of 206 would further strengthen the trend and would trigger the momentum for upward movement in the coming days,” she said.

Parekh further added that the RSI indicator which is well placed has also indicated a trend reversal to signal a buy thus supporting and justifying our view of a positive outlook in the midcap stock.

With the chart looking attractive, Parekh suggests a buy and accumulate this stock for an upside target of 240-255 keeping the stop loss near 188 level for a time frame of 2-3 months and anticipating decent returns.  

(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.)