Larsen & Toubro 06-09-2013(Technical Analysis)

Last week Nifty Future not only recovered but also closed near 5700 as we expected to possible move in Nifty Future, please do read our previous blog on Nifty Future for more information.

Most of the stocks rallied quite sharply, but there are some of stocks which shown reversal in trend but yet to rally or we can say these stocks still have potential to rally to much higher level in coming days.

One of these stock is LT, we feel it will move more higher levels in coming few days, below is technical view on LT.

 When LT broken down its long term support level 872 on 24^th July 2013, this stock fell sharply as we can see in below figure of technical daily chart of LT, we have drawn a support trendline for more clear view.

When LT moved downward till 700 odd level, it has fell in trend & we can see a down trendline in above figure to get more clear & confirmed down trend of LT. But what happened now is LT is showing some bull signs or we can say a long setup is clearly seeing in LT from recent few days.

One important point is LT has broken out from a down trendline from last 2 trading days which is a sign of change in trend; it can be a reversal in trend for LT in coming few days & for that we need to look into others indicator which explain below.

1. DOJI- A inside Doji with higher volumes, when LT down by 4.6% on 3^rd Sep 2013, volume wasn’t much. In fact when LT has a inside Doji, volumes is much higher than its previous day. In figure, red volumes is for negative movement & green volumes is for positive movement of stock. It clearly showing form last few days green volumes bar is more that red volumes bar. It is confirming a bottom formation in LT as we guess.

2. RSI- 14 days RSI is also strengthening day by day and it also forming higher peaks & higher bottoms. It is showing divergence with price which is a bull sign.

3. ADX- A plus directional indicator (+DI) keeps on increasing from last few days, and ADX(Avg. Directional Index) is coming down, it has tested 38 level when LT was falling. Now ADX is 34 and we have to look if +DI will cross ADX or not for next positive rally for LT.

These are reasons why we bullish on LT  for  short to medium term.
Target is 870 & stop loss is 720 on closing basis.

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