We recommend buying United Spirits (McDowell) above Rs 600-604 levels with a stop loss of Rs 554 for higher targets of Rs 676.
Simple Moving Average and Market Trends
Moving averages are considered the most important indicator for determining trends in the stock price. If the moving average is rising, the trend is considered up. On the other hand, if the moving average is falling, the trend is considered to be down.
Moving Average Crossover• When the shorter moving average crosses above the long-term moving average, it shows the trend is shifting up and creates a buy signal.
• When the shorter moving average crosses below the long-term moving average, it shows the trend is shifting down and creates sell signal.Why to Buy United Spirits (McDowell)?
A bullish crossover of 50 DMA and 200 DMA is called “Golden Crossover” which is the most popular crossover among the traders community.
Positive short-term and mid-term trends with Golden Crossover in MCDOWELL suggest bullish momentum ahead. However, a strong rally will unfold on a breach of major resistance trend line standing around 604 marks.
Figure.1. Golden Crossover and Buy signal on McDowellBuy Signal:-
1. The short-term moving average 50 DMA defines mid-term trend which is rising and placed around Rs 576 marks.
2. The long-term moving average 200 DMA defines long-term trend, and it is rising and placed around Rs 574.
3. Recent close prices (Rs 588) are trading above the short-term moving average and the long-term moving average.
4. The occurrence of Golden Crossover of 50 and 200 DMA around Rs 575 shows strong strength and bullish momentum in progress.
5. A major resistance breakout will come only above Rs 604 levels, which can push prices higher towards previous swing high.Profit Booking:-
• Whenever the price candle is near the previous swing high which is near Rs 676 levels.Stop Loss:-
• The entire bullish view negates on breaching of low of swing bottom candle. One should exit from the long position. In case of McDowell, it is placed around Rs 554 levels.
• We recommend buying United Spirits (McDowell) above Rs 600-604 levels with a stop loss of Rs 554 for higher targets of Rs 676 and Rs 720 as indicated in the chart above.
(The author is , Head - Technical and Derivative Research, Narnolia Financial Advisors Ltd.)
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