>TEXMACO

Long awaited consolidation in Texmaco has finally come to an end after prices continued their upward march to finally surpass the resistance of ‘ascending triangle’ with improved volumes. As the stock has hit a ‘double top’ formation in Feb 2010, prices have retraced back almost 38.2% of its earlier up move beginning from March 2009 and has shown quiet a bit of resilience to hold above the levels of Rs132.

Prices on the Medium chart resemble ‘inverted head and shoulder’ formation and breakout may accentuate buying momentum as volumes have started to react positively to price increase. The
neckline of ‘inverted head and shoulder’ corresponds at Rs141 which should now act as strong support zone. This move also corroborates the minimum downside risk and very high upside potential.

To be more precise, the correction after Dec 2009 unfolded in a classical ‘zig zag formation’ followed by prices crossing above the long term Fibonacci moving average of 161 days and have sustained above same for three consecutive trading sessions. Analyzing earlier price history indicates that such an early attempt has turned out to be a mere whipsaw for couple of times.

Studying MACD oscillator, a crossover above the reference line accompanied with breakout from falling resistance line supports the argument for decent upside. One can also see horizontal breakout in RSC chart with Nifty which indicates that the stock is likely to outperform the benchmark index in the near term.

Based on ‘inverted head and shoulder’, we project conservative target of Rs175 which is marginally higher than Dec 2009 peak of Rs170.5. However, in case prices are able to sustain above Rs175, next leg of rally can take prices all the way to its all time peak of Rs196.

We thus advise accumulating the stock in the range of Rs141- 147 with stop loss of Rs132 for target of Rs176.

To read the full report: TEXMACO