Larsen & Toubro (L&T) was trapped between two trend-lines; one was the “Upward Sloping Trend-line” and the other was the “Horizontal Resistance Line” that represents boundaries of the “Ascending Triangle Pattern”.
L&T has been vacillating within the ascending triangle pattern for almost 60 months during which the stock held on to its upward sloping support line since March 2009. On the upside, L&T attempted to breach the Horizontal resistance trend-line in November 2010; however, the attempt proved futile.
Finally, after going through a reliable phase of consolidation and witnessing gradual upswings, L&T has broken out from a “Multi-Year Ascending Triangle Pattern” which is considered to be bullish.
The stock has recently hit fresh life-time highs. Technical indicators and oscillators also provide clearer picture on potential up-moves, pointing to a possible strong appreciation in the medium term. The breach has been accompanied with strong up-tick in traded volumes, adding credence to the breakout.
With the stock’s primary trend pointing upward and given the above evidence, we recommend a BUY on L&T for a potential target of Rs. 1,864 in the medium term. We advise a strict Stop Loss of Rs. 1,390 on every long position.
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