Rural Electrification Corporation
Time taken to complete the correction was 21 months from the top formation month, so that was a complete correction in terms of
percentage as well as time cycle.
As it was a complete correction in itself, so here we can safely assume that the bottom formed that way, of INR 142, will sustain in the periods followed after that date and might not get penetrated in future unless and until something extraordinary event takes shape.
Our view is also justified by the next move of the stock which we witnessed after the completion of correction of 65.3%. From the bottom of INR142 we saw a good and swift up move up to the levels of 267.5 reached on 31st January 2013.
Here again the time taken was exactly eight months from the month of correction lows so time cycle theorem supports this as well.
Price of the stock was supposed to move up by 65.3% from the bottom that comes at INR 234.70, BUT instead the rates went much beyond that and touched INR 267.5 on 31st January 2013.
Since last two years this stock was moving in a broad range from lower side of 145 to higher band of 245. So this was a first genuine attempt to break from the range bound move, in which the stock was, from last two years but as the bottoming out process was still not complete so the attempt to breakout could not succeed.
And we saw a correction following from 267 by 45.3% till the levels of INR146 on 30th august 2013. Point to note that bottom formed was little higher than the previous one of INR 142.
As per our analysis the bottom formed of INR 142 was strong and technically correct, so the next bottom formed at INR 146 was higher although by small difference and a good up move followed from that bottom as well.
Here we should note one important thing, and that is, the bottom formed was almost more or less same but top was much higher if counted in percentage retracement equality terms. So this indicates that in future we might not see a bottom lesser than the one already formed.
Now we also consider some important parameters like 200 DSMA – 199.60, 13 DEMA – 187.58 and 55 DEMA – 195.49.
At present both near term averages, 13 DEMA and 55 DEMA, are below long term average of 200DSMA, so it sends signals that still stock may face some stiff resistance in the coming few weeks and the range of resistance could be from INR 187 to 199.
And the next set of resistance, after the above discussed one, comes at INR 212 which is a 45.3% up move from the bottom of 146. It is so because stock corrected by the same percentage from intermediate top of INR 267.
After that, the main resistance, that needs to be broken with very good volumes and closings, shall be INR 234. We need to see that price of this stock closes above this rate for four consecutive days and for two consecutive weeks with very good volumes.
Support for the stock will come in at the levels of INR 176, 160 and finally at INR144.
Still the stock of REC is in consolidation mode so trades can be initiated keeping in mind the support and resistance levels mentioned as above. No major pattern formation is still visible on short as well as on long term charts.
Astro - Tech Analyst