ICICIdirect has recommended 'Buy' on ITC in the range of Rs 345-338 for target of Rs 385 with stop loss of Rs 319 on a closing basis.
Commenting on the technical rationale, the stock broker said," The share price of ITC took a breather after a stupendous rally during the first half of 2013 as the stock is seen consolidating off its July 2013 highs of Rs 380 over the last eight months. The declines, however, produced rising troughs on account of constant demand at lower levels thereby maintaining a bullish undertone from a medium term perspective.
A corrective retreat in share price post the July 2013 peak of Rs 380 attracted supportive efforts near the 52-week EMA (then 298) during August 2013 before the share price entering a ranged trading activity during November 2013 - February 2014 in a price band of Rs 335-308.
A close observation highlights the fact that the entire basing pattern during November 2013 - February 2014 is rested upon the rising 52-week moving average (currently 321) and a key medium term trend line drawn by connecting the swing lows of June 2012 and August 2013. The share price validated this key support on numerous occasions and got resolved higher during March 2014 indicating resumption of a medium-term bullish trend.
Historically, a rising 52-week moving average has consistently attracted support for prices and the same tendency was exhibited even during the August 2013 to February 2014 period, boosting the significance of this key long term moving average.
In arch 2014, the stock emerged out of a trading range (Rs 335-308) signalling resumption of the medium-term uptrend. During last week, the stock retreated from its March 2014 gains (312-365) by 50%, thereby providing a fresh entry opportunity for medium-term players to ride the next up leg.
Among oscillators, the weekly MACD indicator (E-12/26/9) has bounced off its signal line and generated a positive cross over above its nine period moving average highlighting positive momentum in the stock trend.
Based on the aforementioned technical observations, we believe the stock is set to enter a sustainable uptrend and challenge its all-time highs at Rs 380. We project a target price of Rs 385 being the equality of the August - September 2013 rally (285-358 = 73 points) as projected from the February 2014 lows of Rs 312 (312+73 = 385), thereby providing an upside of Rs 385 over the medium term.''
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