Key technical observations
The stock has registered a breakout from the bullish Flag pattern in Wednesday’s session signalling the end of the secondary consolidation and resumption of the next up leg, thereby offering a fresh entry opportunity to ride theongoing uptrend from a medium-term perspective
The stock hit an all-time high of | 543 in the first week of January 2015 and, thereafter, entered a secondary corrective phase over the last four weeks. Pictorially, the sideways consolidation since January 1, 2015 till date appears to have taken the shape of a bullish Flag pattern on the weekly chart. A Flag formation is a bullish continuation pattern, which marks a temporary pause in an ongoing uptrend as bulls take a breather to gather steam for further northward journey
Structurally, the rallies are stronger and faster whereas the corrective declines are shallow and time consuming indicating a constructive price structure. The stock completely retraced its eight weeks decline of August-October in just five weeks signalling strength in the price structure. The 13 weeks EMA has historically acted as strongsupport in the stock during the secondary corrective price action as can be seen in the adjacent chart and iscurrently placed at | 490 levels
Volume behaviour is in line with bull market assumption where rallies are supported by volumes double than 50-week average of 10 lakh shares while declines have seen fairly low participation indicating larger participation inthe direction of the trend
Among oscillators, the 14 period RSI has bounced back taking support at its previous low and given a bullish crossover above its nine period’s average, thus validating the positive price trend
Strategy: Buy Timken India in the range of | 505.00–515.00 for a target price of | 675.00 with a stop loss below |475.00 on a closing basis
Conclusion: Based on the various technical observations listed above, we believe the stock is set for its next up leg within the broader bull phase and is likely to head towards | 676 levels being the price parity with the previous rally (543-371=172 points) from recent trough of | 504. Projects upside towards 676 (504+172=676)
