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HPCL: Strong bullish breakout seen above Rs 230-235 levels; 89-SMA suggests buying opportunity

We recommend buying Hindustan Petroleum Corporation around Rs 240 with a stop loss of Rs 205.

February 27, 2021 / 05:23 PM IST
 
 
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What is 89-Moving Average of 89-MA Band Setup?

The MA (moving average) breakout appears on a chart when a stock's price crosses above its mid-term moving average 89 SMA (89 days simple moving Average-High). As long-term indicators carry more weight, the MA breakout indicates a bull market on the horizon and is reinforced by high trading volumes.

There are mainly three stages to the 89-MA band. The first stage requires that a downtrend eventually bottoms out as selling is depleted. In the second stage, the prices trade higher above 89-SMA (Low) moving average to trigger a breakout and confirmation of trend reversal. The last stage is the continuing uptrend for the follow through to higher prices by trading above 89-SMA (High).

Fibonacci number series plays a crucial role in term of understanding support and resistance on charts. As 89 is part of a Fibonacci serious, 89-MA band is popular, simple and easy to spot on charts for mid-term perspective. Moving averages can be powerful when understood correctly; however, they are the simplest and easiest tool for developing a trading setup. The MA breakout setup is believed to be one of the most reliable and popular among the traders community.

Why to Buy Hindustan Petroleum Corporation (HPCL)?

Close

MA breakout, a moving average setup is an integral part of technical analysis, but successful traders combine these techniques with momentum indicators and other forms of tools to maximize their odds of success.

HPCL is having a strong supply zone standing around Rs 230-235 levels indicating a strong bullish breakout above these levels. Recently prices have given breakout on this stock forming MA breakout setup, as prices are closing above 89 SMA (High). This setup indicates prices are trading with strong positive sentiments and are ready to surge higher.

At the same time, the stock is trading above the crucial resistance line standing around Rs 245 mark which denotes that prices are moving with a bullish bias in the mid-term as well as in the long-term. Nevertheless, price action in favour of bulls and any decisive move above Rs 260 will accelerate the movement. The above rationale suggests one should buy HPCL on dips for higher targets of Rs 320.

Image12722021Figure.1. 89-MA band breakout Setup and Buy signal on HPCL


Buy Signal

1. A close above crucial resistance zone (Rs 230-235) indicates current up trend is still intact.
2. Prices are trading above mid- term moving average 89 SMA (High) defines mid-term trend is very well augur with bulls as prices are sustained and trading around it.

3. Decent volume participation near demand zone will also give additional confirmation.

Profit Booking

In terms of MA breakout Setup profit needs to trailed towards higher side till we see decisive closing below 89-SMA(Low); however in this stock we will consider as a previous swing high which is placed around Rs 320 mark.

Stop Loss

The entire bullish view negates on decisive closing below 89-SMA (Low) moving averages. In case of HPCL, we will consider Rs 205 as a stop loss level.

Conclusion

We recommend buying Hindustan Petroleum Corporation around Rs 240 with a stop loss of Rs 205 on a closing basis for higher targets of Rs 320 as indicated in above chart.

Disclosure: Narnolia Financial Advisors is a SEBI registered Research Analyst having SEBI Registration No. INH300006500. The Company/Analyst (s) does/do not have any holding in the stocks discussed but these stocks may have been recommended to clients in the past. Clients of Narnolia Financial Advisors Ltd. may be holding aforesaid stocks. The stocks recommended are based on our analysis which is based on information obtained from public sources and sources believed to be reliable, but no independent verification has been made nor is its accuracy or completeness guaranteed. The views expressed in this research report accurately reflect the personal views of the analyst(s) about the subject securities or issues, and no part of the compensation of the research analyst(s) was, is, or will be directly or indirectly related to the specific recommendations and views expressed by research analyst(s) in this report

Disclaimer: The views and investment tips expressed by investment expert on Moneycontrol.com are his own and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.
Shabbir Kayyumi is the Head of Technical & Derivative Research at Narnolia Financial Advisors.
first published: Feb 27, 2021 05:23 pm

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