Technical Analysis: Avenue Supermarts, Eicher Motors and Punjab National Bank
Avenue Supermarts (₹4,023.25)
Bounces off a base
The stock of Avenue Supermarts saw a sharp fall in price between the final week of September and mid-December. The price level of ₹5,400 resisted the bulls resulting in the price tumbling to ₹3,430. Towards the end of 2021, too, ₹5,400 acted as a strong barrier and triggered a considerable sell-off. So, this level is a strong resistance from a long-term trend perspective. That said, over the past couple of weeks, the stock has been appreciating and has posted consecutive weekly gains.
Note that the price band between ₹3,200 and ₹3,400 is a good support and has been holding well since 2022. A breach of these levels can lead to sharp sell-off. But as there has been a rebound from near this base recently, the chances for a rally is high. So, traders can buy at the current level of about ₹4,020 and accumulate if the price drops to ₹3,600. Place a stop-loss at ₹3,100. When the price rises to ₹4,400, its 50-week moving average, revise the stop-loss upward to ₹4,000. Tighten the stop-loss further to ₹4,500 when the stock appreciates to ₹5,000. Liquidate the longs at ₹5,400.
Eicher Motors (₹5,308)
Breaks out afresh
The long-term trend for the stock of Eicher Motors is bullish. But since May, it has largely been charting a sideways trend. It was oscillating between ₹4,550 and ₹5,050. After several months of consolidation, Eicher Motors broke out of ₹5,050 last week. This is an indication that the stock is now gathering upward momentum. The breakout also confirms a bull flag chart pattern. This is a trend continuation pattern, meaning, the stock is likely to see a leg up from the current level. According to this chart setup the scrip can appreciate to ₹6,400 and this can happen quickly.
But there might be a price correction before this surge. Such a temporary down move can drag the stock to ₹5,050, a resistance-turned-support level. The trend will turn bearish only if the stock falls back below the support at ₹4,550. One can go long at the current level of about ₹5,300 and buy more shares when the price dips to ₹5,050. Place initial stop-loss at ₹4,550. When the price rises to ₹5,800, trail the stop-loss to ₹5,400. On a rally to ₹6,100, tighten the stop-loss to ₹5,970. Book profits at ₹6,400.
Punjab National Bank (₹106.40)
Bullish reversal in trend
The stock of Punjab National Bank (PNB) witnessed a steady decline in price between June and October last year. After it found support at ₹95, the price started to move up gradually and it closed at ₹106.40 last week. It has been making higher lows, indicating that the momentum is shifting in favour of the bulls. As the price moved up, it broke out of a falling trendline hurdle and the price is now above both the 20 and 50-day moving averages, denoting a potential bullish trend reversal.
Also, the stock has formed a morning star pattern on the weekly chart, another sign of the tide shifting in favour of the bulls. Thus, the probability of an upswing is high. It can hit ₹140 in the medium term. So, one can consider buying the stock of PNB at the current level of ₹106 and accumulate if the price dips to ₹95. Place stop-loss at ₹90 at first. When the price rises to ₹120, revise the stop-loss to ₹105. Move the stop-loss further up to ₹120 when the stock touches ₹130. Exit at ₹140.