ICICIdirect recommends buying Indian Hotel Company in the range of Rs 92-88 for target of Rs 110 with stop loss of Rs 83 on a closing basis.
Commenting on the rationale, the stock broker said, "The entire price movement since mid-February 2012 till May 2014 has taken the shape of a rounding base formation as highlighted in the adjoining weekly chart. A rounding bottom is a key reversal pattern, which develops during a sustained downtrend and most negatives surrounding the stock get absorbed at the base of the rounding pattern. A gradual improvement in the sentiment lifts the stock back to the neckline of the pattern and an eventual thrust past the neckline signals a major turnaround from a medium-term perspective.
The neckline of the rounding pattern also coincided with the previous breakdown area of Rs 76. The stock steered past the neckline above Rs 76 during May 2014 to signal a breakout from the rounding bottom, thereby signalling a change of guard from a medium-term trend perspective.
Volume behaviour during the pattern formation and during the subsequent breakout highlights the bullish structure. The price breakout was accompanied by a strong surge in volumes as the stock witnessed more then five times its 50 week average volume (27 lakh shares per week) indicating strong participation in the direction of the trend.
We expect the stock to head towards the target of Rs 110 levels being the measuring implication of the price pattern i.e. the distance between the neckline Rs 76 and the base of the rounding pattern Rs 41 (76-41=35) added to the breakout point (76+35=111), which also coincides with the 100% extension of the previous up move from Rs 68 to Rs 93 as projected from the recent higher bottom of 84.50.
Among momentum oscillators, the MACD indicator (E-12/26/9), which gauges the strength in an underlying price trend, is in rising trajectory and is seen taking support at its nine periods average highlighting the strong positive momentum in the trend."
Disclaimer: IRIS has taken due care and caution in compilation of data for its web site. Information has been obtained by IRIS from sources which it considers reliable. However, IRIS does not guarantee the accuracy, adequacy or completeness of any information and is not responsible for any errors or omissions or for the results obtained from the use of such information. IRIS especially states that it has no financial liability whatsoever to any user on account of the use of information provided on its website.