Technical Check: This manufacturer which rose over 150% could rally another 20% in short term

HEG Ltd, a leading manufacturer, and exporter of graphite electrodes in India, has already rallied by over 160 percent so far in the year 2021, compared to the 27 percent rally seen in the Nifty50, and about 33 percent upside seen in the S&P BSE 500 index.

Shares of HEG which hit a fresh 52-week high of Rs 2626.15 on 5 October could see more upside after registering a falling trendline breakout in October could well push the stock towards Rs 3025 that translates into an upside of 20 percent from 5 October closing of Rs 2520.

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Technically, the stock is trading well above the short-and-medium-term moving averages. MACD or the Moving average convergence divergence, a trend-following momentum indicator is trading above its center and signal line which is bullish for the stock.  

HEG Limited is a leading manufacturer and exporter of graphite electrodes in India and operates world's largest single-site integrated graphite electrodes plant at Mandideep in Madhya Pradesh, said the company website.  

The June quarter earnings were robust as Net sales rose to over Rs 400 cr on a year-on-year basis, while the net profit saw a YoY jump of nearly 300 percent.  

The stock with a market capitalization of more than Rs 9,600 cr has been on a buyer's radar so far in the year 2021 as well as for the past 1 year. The stock has rallied more than 200 per cent in the last year.

“A swing trading opportunity is spotted in HEG ltd Currently the stock is trading at 2542 Rs and has given a falling trendline breakout. On the front of the moving average, it is trading well above its 21 Days EMA which is placed at 2260,” Vishal Wagh, Research head, Bonanza Portfolio, said.

“Important support for the stock is at 2440 and the resistance lies near 3200. A swing trading is a style of trading that attempts to capture short- to medium-term gains in a stock over few days to weeks,” he said.

On the indicator front, the Relative Strength Index (RSI) lies at 70 and is rising upwards which indicates that the stock will continue its upward momentum.

“ADX on daily timeframe which shows the strength of the trend is beginning to move upwards and showing a reading of 20.6 along with +DMI making higher high higher low formation making an ideal candidate for a swing trade,” he said.

Looking at the above technical evidence, Wagh recommends investors to buy the stock for a short-term target of Rs 3025, and a stop loss can be placed at Rs 2340.

(Disclaimer: The views/suggestions/advices 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.)