Chart Check: After 30% returns in 3 months, trendline breakout makes REC an attractive buy

A broadening pattern breakout on the daily chart suggests that the momentum is intact. Short term traders who missed the rally can look at buying the stock for a target above Rs 130 in the next 3-4 weeks, they say.

The bulls remained in control of REC. The stock price rose more than 9% in a week and 11% in a month. Tracking the momentum, the stock hit a 52-week high of Rs 124 on 5 January 2023.

The stock bottomed out near 80 levels when it hit a 52-week low of Rs 83 on 20 June 2022. The stock has been making higher highs and higher lows on the monthly charts for the past 4 months.

In terms of price action, the stock price is trading above most of the crucial short and long term moving averages of 5,10,30,50,100 and 200-DMA which is a positive sign for the bulls.

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The Relative Strength Index (RSI) is at 69.5. RSI below 30 is considered oversold and above 70 is considered overbought, Trendlyne data showed. MACD is above its center and signal line, this is a bullish indicator.

The stock is forming higher highs – higher lows on a monthly scale from the past four months and given strong consolidation breakout on weekly scale.

“REC has formed a strong bullish candle on weekly scale and is forming higher lows on daily scale from past four sessions which indicates support are gradually shifting higher,” Arpit Beriwal, Analyst, Equity Derivatives and Technicals, MOFSL, said.

“The stock has given a broadening pattern breakout on daily scale which has bullish implication and holding well above its 20 DEMA. Relative Strength Index (RSI) is also above 70 zones on daily scale which suggests overall momentum to continue, and stock is likely to outperform,” he said.

Looking at the overall chart structure on daily and weekly scale, there is a higher probability of the stock to move higher towards its multi-year high zones.

“We recommend buying the stock at current levels with keeping stop loss below Rs 116 levels on closing basis for an upside move towards Rs 132 zones,” recommends Beriwal.

(Disclaimer: MOFSL, Research Analyst and/or his relatives may have financial interest in the subject company. The above mentioned are Beriwal’s personal views and not of the company MOFSL to which he represents. Further, recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)