Moneycontrol
Oct 13, 2017 12:05 PM IST | Source: Moneycontrol.com

RIL up 62% in 2017 hits a fresh high ahead of Q2 results; here’s how to trade stock

The past behavior of stock for the last 5-6 quarters suggest profit booking post result outcome (last quarter was exceptional). The corrective action generally comes in the range of 7-10% percent after result outcome.

Kshitij Anand @kshanand
 
 
live
  • bselive
  • nselive
Volume
Todays L/H
More

Reliance Industries rose to a record high of Rs 891 on the BSE for a second consecutive day in a row on Friday just ahead of its results for the quarter ended September 30. The oil & gas major will declare results post market hours.

Consolidated profit is expected to be at Rs 8,169 crore for the quarter against Rs 9,079 crore in previous quarter. According to an average of estimates of analysts polled by CNBC-TV18, earnings before interest, tax, depreciation, and amortisation (EBIDTA) is likely to be strong at Rs 13,178 crore, compared with Rs 12,554 crore in June quarter.

Edelweiss Securities expect a robust Q2FY18 performance for the Oil & Gas sector, following an operationally strong Q1FY18. For RIL, strong refining will be somewhat offset by subdued polyester spreads.

However, the ramp‐up in new capacities and benefit of ethane imports will buoy earnings. It estimates a strong quarter with standalone PAT of Rs8800 crore, up 7 percent QoQ. The GRM could surprise D-Street at USD 12.4/bbl (up 4% QoQ), a USD4/bbl premium over Singapore benchmark.

After witnessing the breakout of 8 years consolidation (from September 2008 till December 2016) between Rs560 to Rs340 levels, the stock has been in an uptrend across all the time frames.

The stock has been in an uptrend throughout 2017, thanks to optimism around its telecom venture, Jio and a sharp improvement in refining margins. RIL gained over 60 percent so far in the year 2017, compared to 20 percent rally in the S&P BSE Sensex.

However, since the last three months, the stock has undergone a consolidation phase wherein the prices have traded in a broad range of Rs870-760. This consolidation phase seems to be a time-correction in the prices, suggest experts.

“Chart pattern indicates that if the stock faces any profit booking, it may find support around Rs 770-760 levels; however, any breakdown below Rs 760 would accelerate the selling in stock which may drag it towards Rs 723-710 in short-term,” Rajesh Palviya, Head Technical & Derivative Analyst, Axis Securities Ltd told Moneycontrol.

However, if stock observes breakout from its consolidation range (Rs 870-760) then it is likely to scale towards 930-950 levels in short to medium term, he said.

The past behavior of stock for the last 5-6 quarters suggest profit booking post result outcome (last quarter was exceptional). The corrective action generally comes in the range of 7-10% percent after result outcome.

Palviya further added that post-correction of 15-20 days the stock bottoms out and demonstrated strong recovery and witnessed around 20-30% percent gain from the bottom made after results in 1-2 months.

It took RIL 8-10 years to replicate its massive outperformance that we saw in the calendar year 2007. Most of the investors trapped then had to undergo massive time-wise pain, but now it looks like the pain is over and investors should eye big gains.

RIL is in a strong bull run and investors who should hold onto the stock for bigger gains. It is one stock which should be part if your portfolio and any dips should be used as a buying opportunity.

“If we consider its ex-bonus price, a multi-year breakout point was around the 550 mark. The moment this stock surpassed this hurdle on a sustainable basis, we witnessed a beginning of strong ‘Bull Run’,” Sameet Chavan, Chief Analyst- Technical Derivatives, Angel Broking Pvt Ltd told Moneycontrol.

“Considering the broader picture, there is no second thought whether the stock should be held in the portfolio or not. There is still a long way to go from here for this counter, but this will happen with a time,” he said.

We have collated a list of views from different experts on how to trade RIL ahead of results:

Analyst: Mazhar Mohammad, Chief Strategist – Technical Research & Trading Advisory, Chartviewindia.in

After multi-year underperformance, this counter successfully aligned itself with the bull market frenzy as it broken out of a multi-year triangular formation couple of months back.

Short term trading bets or even fresh positional longs should be considered only when this counter trades above Rs862 levels on closing basis in post result sessions.

Any sell-off in this counter owing to weakness either in broader markets or disappointment on result front shall drag it down towards critical supports placed in the zone of Rs818 – 810 where long-term investors can enter.

Analyst: Arpit Jain, AVP at Arihant Capital Markets

The stock is showing some accumulation pattern on the longer term chart. Further, the weekly chart is still maintaining Higher – top Higher –bottom formation which is a sign of strength.

The momentum indicators are positively poised. There strong demand at 800 – 780 levels.

Hence one should hold the stock with a stop loss 779 for a target of 930 – 980 levels in a couple of weeks.

Analyst: Pragnesh Jain, AVP Technical Research - Institutional Equities, Systematix shares

The key resistance level is placed at Rs875 which can act as a hurdle. A breakout above Rs875 is required for further up-move after which it can extend upside to the extent of 915-930 zone where traders can look to book profits.

Failure to breakout and sustain above Rs875 can see it slip back till Rs820-795 levels. Overall strong as long as 780 holds.

Analyst: Rajesh Palviya, Head Technical & Derivative Analyst, Axis Securities Ltd.

Trading Strategy 1: Buy on a breakout

The stock is in process of forming a Rectangular Pattern on the weekly chart and shown V shape recovery on daily chart in recent past, so if it manages to break out above Rs 870-875 one can buy the stock from a near-term trading perspective with a target of Rs 920-935 and stop-loss of Rs 845

Trading Strategy 2: Buy on dips

Looking at the behavior of stock it corrects around 8-10% after results in next 10-15 days (only last quarter was exception), if the stock reacts negatively one can look for buying it around Rs 790-770 levels with a final stop-loss of Rs 740 to play for a pullback action with a target of Rs 870-880 in 1-2 months’ time frame.

Trading Strategy 3: Short Sell if breaks below 835

Looking at the near term chart reliance is having immediate support of 835 if stock breaks below 835 one can go short in stock with stop loss of 855 for lower side target of 790-770 in near/short term basis.

Analyst: Sameet Chavan, Chief Analyst- Technical Derivatives, Angel Broking Pvt Ltd.

As far as its activity around the ‘Quarterly Result’ is concerned, there has been mixed reactions on 2 out 3 previous occasions. There is not much symmetry to think about.

At present, the stock prices are trading way above its low (680.45) made after last ‘Quarterly Result’ day and is still going strong as we saw the stock clocking fresh record high today.

Investors can wait for dips to come or some kind of consolidation to happen and that’s the only option left for them. As far as momentum traders are concerned, Thursday’s close of Rs838 was quite encouraging and the stock may continue this rally in the near term.

Disclosure: Reliance Industries Ltd. is the sole beneficiary of Independent Media Trust which controls Network18 Media & Investments Ltd. The views and investment tips expressed by investment experts on moneycontrol.com are their own and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.
Sections
Follow us on
Available On