Two Trades for Today: An FMCG major for 3.5% gain, a large-cap oil refinery stock for 6% rise
The markets continued consolidating for the third day in a row and closed Friday on a flat note. The markets saw a stronger-than-expected start and trended higher, forming its high point in the morning session.
However, by afternoon, the Nifty had given up all its gains and had also slipped into the negative zone, forming its day's low point. The remainder of the session was spent in a very narrow range. The headline index closed with a minor gain of 12.50 points (+0.05)
While the markets continue consolidating at current levels, some defensive plays are evident. This FMCG major is gradually inching higher; it is expected to extend its current upmove over the coming days.
ITC Limited
(ITC) suffered a sharp corrective move after the stock traded in a range between November and February of last year. It made a strong attempt to put a base in place by the end of February; since then, it has gradually trended higher. Currently, it is trading above two of its three key moving averages. Additionally, it has closed above its 20-period MA as well.
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The daily MACD is bullish and stays above its signal line. The RSI also stays neutral and does not show any divergence against the price. The surge that led the stock cross above the 20-DMA has come on much higher-than-average volumes.
The RS line is trending sideways indicating the stock trading in line with the broader markets. It has crossed above its 50-period MA.
The stock is seen improving its relative momentum while inside the lagging quadrant of the RRG. The extension of the current upmove is likely to sustain and take ITC higher to Rs. 445. A close below Rs. 422 must be used as a stop-loss for this trade.
Milan Vaishnav, CMT, MSTA, is a Technical Analyst.
Indian Oil Corporation Limited
This large-cap oil refinery stock broke out from the horizontal trendline resistance. This could trigger a potential upmove in the stock by close to 6%, and this makes the current levels attractive to enter with a favorable risk-reward ratio.
After forming a brief triple-top at Rs. 183 in September last year, the stock price of Indian Oil Corporation Limited (IOC) witnessed a corrective decline. The downtrend continued until it formed a bottom at Rs. 110 in March this year and showed signs of a rebound.
While moving higher, the stock crossed above the 50-day and 100-day MA, indicating that the intermediate trend had turned bullish.
Recently, the stock broke out from the horizontal trendline resistance, inviting buying opportunities.
This price action has been backed by increased volume, supporting bullishness.
The Relative Strength Index (RSI), a lead indicator, observed a bullish divergence. The price had formed a lower bottom in March, but the RSI formed a higher low, adding further bullishness to the stock.
PSAR continues to remain in buy mode.
Thus, the formation of higher tops and higher bottoms, breakout from the resistance level, increased volumes, and PSAR in a buy mode lays the ground for a potential upmove in the stock by 6%. Any move below Rs. 137 should be considered for moving out of the stock.
Foram Chheda, CMT, is a Technical Research Analyst.
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