ICICIdirect recommends buying Hindalco Industries in the range of Rs 150-145 for target of Rs 185 with stop loss of Rs 137 on a closing basis.
Commenting on the rationale, the stock broker said, "The most important observation in the daily chart of Hindalco is that since March 2014 the stock has been trading in a well structured upward rising channel. The price respected the upper and the lower boundary of the channel signalling bullish structure in the short term.
The recent corrective decline since the May 2014 high of Rs 163 attracted fresh demand around Rs 142 levels, which was seen as a key short term support for the stock based on the confluence of the following observations: The 61.8% retracement of the previous up move from (130-163) placed at Rs 142 levels, 63) placed at Rs 142 levels, The lower band of the rising channel in placed since Mar’14, The presence of 34 days EMA which has acted as strong support during recent up move and is currently placed at 143 levels.
The behaviour of volumes during the rallies and correction phase also substantiate the strength in the underlying trend. While rallies during February-May were accompanied by almost twice the 200-days average volume (85 lakh shares per day) whereas the corrective decline has seen a fall in volumes to almost half of the average volume, which indicates lack of participation on the downside and highlights the underlying strength in the uptrend.
We expect the stock to head towards the target of Rs 185 in the short-term being the upper band of the rising channel and 123.6% extensions of previous up move from Rs 130 to Rs 163 as projected from the recent higher bottom of Rs 142.
Among oscillators, the daily 14 periods RSI is seen taking support at its own trend line and forming higher lows on a daily time frame, which validates underlying strength and positive momentum in the short-term."
