Jubilant Life Sciences - Technical Update

After forming an interim top at Rs395, the stock has undergone decent price wise as well as time wise correction

January 01, 1970 5:30 IST | India Infoline News Service
CMP Rs230, Target Rs300, Upside 30.2%

On a jubilant road to good health

The side-ways movement from February 2011 to October 2012 (highlighted in the weekly chart below) has smoothly transitioned into a rectangular pattern. Such patterns in trading means consolidation or indecision among the market participants. Bulls keep pushing prices to higher fence and bears keep declining the prices to lower barrier. Usually such consolidation are renowned as support and resistance levels. Breakout from such patterns are considered to be bullish.

Breakout from rectangular pattern

For Jubilant Life Sciences, the stock has broken out from the rectangular pattern after a long period of consolidation. On the weekly chart, it is evident that the volumes decreased during the consolidation period and picked up as the prices broke out from the upper barrier placed at Rs225, suggesting bullish breakout.

Importance of 200-WMA

Jubilant Life Science is a classic example of trend change. i.e. in November 2009, the stock broke out above its 200-WMA and surged ~56%. In January 2011, the stock collapsed ~46%  after it broke below its 200-WMA and that same moving average is likely to act as a support base to ascend higher in the coming weeks.

Bullish Structure

The upmove in the recent weeks has been accompanied with the rising 20 and 50- DEMAs, along with a rising 200-DEMA, suggesting bullish structure as along as the price sustains above Rs195.

Compelling buy at current levels

After forming an interim top at Rs395, the stock has undergone decent price wise as well as time wise correction. It has regained ground above its 200-WMA after spending almost two years in a trading band of Rs150-225. With confirming signals from volumes, moving average and consolidation pattern, the stage is set for the stock to surge from the current levels. Buy for a medium term target of Rs300 with stop loss of Rs195. 

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