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To resume uptrend
The stock of Garden Reach Shipbuilders and Engineers was largely trading in a broad range between October 2021 and the middle of April this year. It was oscillating between ₹210 and ₹270. However, the stock broke out of the range a couple of weeks ago. Although the price softened last week, it is likely to be a correction and we expect the stock to resume the uptrend. Probably the correction could extend up to ₹270 and not beyond that.
On the upside, the stock has the potential to reach ₹360 in the next three or four months. Considering the above factors, traders can initiate fresh longs at current levels and on a dip to ₹270. Place stop-loss at ₹250. When price moves above ₹300, tighten the stop-loss ₹270. Move the stop-loss further up to ₹290 when price is above ₹320. Exit all the longs at ₹360.
Gujarat Gas (₹482.4)
Sustains below resistance
The stock of Gujarat Gas saw a sharp sell-off in February where it dropped from about ₹680 to ₹480. Thus, it slipped below ₹540 - an important support. Trading in a sideways manner, the scrip has remained below the key level of ₹540. So, the probability of the stock falling further from here is high.
Even though ₹480 can be a support, it is likely to be breached. Price could depreciate to ₹410 in two or three months. But before dropping below ₹480, the stock could retest ₹540. Considering the above factors, traders can short in two legs — initiate short at the current level of ₹482 and short more when it rallies to ₹540. Place initial stop-loss at ₹565 and tighten it to ₹485 when price falls below ₹450. Exit at ₹410 as the price band of ₹400-410 is a strong base.
Hero MotoCorp (₹2,506.65)
Resistance ahead
The stock of Hero MotoCorp has been on a decline since February 2021 after facing resistance at ₹3,600. Although the price bounced last week, the scrip is moving within the downward channel. There is a resistance at ₹2,600 from where we expect the stock to resume the decline. Although ₹2,230 is a support, it is a minor one. So, the scrip will most probably slip below this support and fall to ₹2,000 over the medium term.
Given the prevailing conditions, one can short the stock at current level of about ₹2,500 and add more shorts when price rallies to ₹2,600. Keep a stop-loss at ₹2,750. Alter it to ₹2,600 when price slips below ₹2,200. Liquidate all the shorts the stock touches ₹2,000. Note that there could be a corrective rally after the stock falls to ₹2,000.
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