We recommend to buy CCL Products (India) around Rs 220-225 levels with a stop loss of Rs 207.
RSI stands for Relative Strength Index. It is a momentous oscillator used to identify trend reversal. RSI was invented by Welles Wilder Junior. The default look-back period for RSI is 14, however, this can be lowered to increase sensitivity or raised to decrease sensitivity. RSI calculates the strength of a stock trend and helps to predict their reversals.
Why Buy CCL Products (India)?
There are a lot of trading strategies using RSI; below mentioned is one of the most popular among the trading community which involves buying after completing retracement for higher movement; however the support of another momentum oscillator stochastic can give additional support.
In last some days, RSI had given a breakout by trading above 50 levels from below and made a high of 75 then after it is trading lower or retracing towards centre line placed at 50 levels, this behaviour is called as ‘RSI PBB’ setup. RSI PBB is pull back buy setup which indicates, once RSI turns its tail upside after taking support from a zone of 45-55 levels, the target is previous swing high of RSI which was 75 or previous swing high of prices (Rs 250). Currently, the CCL is going through this setup and we expect higher price movement towards previous high Rs 250-260 levels in coming days.
Figure .1. RSI PBB setup and Buy signal on CCL
Buy Signal- Recent RSI gave a breakout and published swing top around 75 levels.
- After marking high of 75, RSI is retracing towards 50 towards mid-line standing around 50 mark.
- Strong bullish candle formation near the buying zone has given us confirmation of retracement complete and original trend begin.
- Mid-term moving average 50 DMA placed around 218 levels defines mid-term trend is very well augur with bulls as prices are sustained and trading above it.
- Decent volume participation while forming a bullish candle will also give additional confirmation.
Whenever price candle will be near previous swing high which is near Rs 250-260 levels.
Entire bullish view negates on breaching of a swing low and one should exit from a long position. In the case of CCL, it is standing around 207 marks closing basis.
We recommend buying CCL Products (India) around Rs 220-225 levels with a stop loss of Rs 207 for higher targets of Rs 250 and Rs 260 levels as indicated in the above chart.
The author is Head - Technical & Derivative Research at Narnolia Financial Advisors.
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