GAIL (India) Limited -Technical Update

After hitting lows of Rs320 in mid-November 2013, GAIL has been steadily consolidating.

February 07, 2014 4:26 IST | India Infoline News Service
CMP Rs360, Target Rs398, Upside 10.5%

Ascending triangleBreak-out

After hitting lows of Rs320 inmid-November 2013, GAIL has been steadily consolidating. Accumulation betweenthe Rs320 - Rs353 range has been on for almost three months now.

In this process, the stock formedan ascending triangle pattern, which is considered to be bullish. GAIL brokeout of the ascending triangle pattern on January 31, 2014 on the daily charts.The breach has been accompanied with strong up-tick in traded volumes, addingcredence to the breakout.

During the consolidation phase, thestock has gradually surpassed key moving averages, and has recently managed toalso surge past its 50 Day Moving Average as is visible in the Daily chart.

Given the intermediate uptrend,the stock is expected to rise post the breach of the ascending trianglepattern.

The stock has also gone through awhip-saw which saw the stock re-testing the ascending triangle breakout levelsof Rs352.

Declining Trend linebreach

To add to the conviction, on theweekly charts, the stock has broken out of a declining trend line marking atrend reversal in the stock. The stock has neatly breached the decliningneckline placed at the Rs342 levels. Traditional momentum oscillators are alsoindicating a positive bias in the counter.

Given the above evidence, werecommend a BUY on GAIL at current levels for a potential upside target ofRs398. Traders are advised to keep a strict Stop Loss of Rs330.

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