Following a steady decline from January 2010 peak of Rs 123, the stock found support in the range of Rs 50 and Rs 53, a key longer-term support, in May 2010.
Triggered by positive divergence displayed in the daily oscillators, the stock changed direction. Since May, the stock has been on an intermediate-term uptrend forming higher peaks and higher troughs. Moreover, the stock took support from its 200-day moving average and intermediate-term uptrendline around Rs 73 on November 26 and subsequently bounced up strongly, gaining 19 per cent last week with above weekly average volume.
The stock breached a key medium-term resistance level as well as 50-day moving average positioned at Rs 88 on Friday accompanied with good volume.
The 14-day relative strength index, which determines the speed and alteration of price movements, has moved to the neutral region from the bearish zone.
The weekly RSI is rising in the neutral region towards the bullish zone. The daily average convergence divergence oscillator is on the verge of re-entering into the positive territory from the negative territory whereas the weekly oscillator is steadily rising in the positive territory implying upward momentum.
The daily price rate of change indicator is on the brink of entering positive territory while the weekly indicator is featuring in this territory, signalling buying interest.
The stock's intermediate-term uptrendline is intact and we are bullish from a medium-term perspective.
We believe that Shree Renuka Sugars has the possibility to move higher to our price target of Rs 104 in the approaching weeks. Investors with medium-term perspective can consider buying the stock with stop-loss at Rs 84.5.
(This recommendation is based on technical analysis. There is a risk of loss in trading.)
Yoganand D.
BL Research Bureau
