The share price of Torrent Power is currently placed at a major value area around Rs 170-172. The corrective decline of the last two months has the underpinning characteristics of a secondary correction within the larger uptrend.
We believe the stock is likely to form a base around the major of Rs 170-172 and resume its uptrend, thus providing a good entry opportunity for short-term with a favourable risk reward set-up.
The corrective decline from the 52 weeks high of Rs 241.95 in the last two-three months has helped the stock price to work out of overbought conditions and discover a value area around Rs 175-170 being the confluence of the 61% retracement of the previous major rally from Rs 120.55 (August 2014) to Rs 252.70 (March 2016) and upward sloping joining from 120.55 (August 2014), 136.75 (June 2015) and 159.30 (November 2016) containing entire up move of 2014-2016. (Shown in separate monthly charts below).
Presently, the stock has formed support ( ) with dates 18/11/2016, 29/07/2016, on weekly charts. Highest point touched during this period is 193.6.support line still holds good, stock is hovering just above support price of 164.25.
On , we observed prices making lower lows (LL), while the oscillator (14-day ) is making higher lows (HL), which is considered to be “Regular Divergence”, that normally occurs at the end of a downtrend.
Further a “Morning star” pattern was formed till previous close, which is a reversal pattern of high reliability, especially when it occurs in a downtrend. (shown in blue circular object).
We expect the stock to resume its uptrend after base formation around the above mentioned and head towards Rs 225 in the coming months as it is the 78.60% retracement of the last two months decline from Rs 241.95 to Rs 172 levels. Hence suggest Buy in this particular stock as per levels mentioned above.