Stock Mantra: After doubling investor wealth in a year, NMDC is once again a 'buy' on technical charts

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© Kshitij Anand Stock Mantra: After doubling investor wealth in a year, NMDC is once again a ‘buy’ on technical charts

The stock of government-owned mineral producer NMDC more than doubled investor’s wealth in the last 12 months. The counter has outperformed Nifty which rallied 43 percent and BSE 200 that rose 49 percent during the same period.

The stellar run has only picked up pace in 2021, as NMDC has surged 58 percent year-to-date.

It has been in a rangebound trade since hitting a 52-week high of Rs 213.15 on 12 May 2021, but now the stock seems to have resumed its next leg of the rally.

According to technical charts, the stock has broken out of a long-term downward sloping channel and could be on track to hit fresh highs in the next 3-4 months.

Investors holding the stocks should continue to hold it while fresh money can be deployed at current levels or on dips. Traders can look at buying the stock for a target of Rs 213-240 which translates into an upside of 17-32% in the next 3-4 months, suggest experts.

Technically, the stock is trading comfortably above short and long-term averages which is a positive for the bulls.

“On the monthly chart prices have broken out of long term downward sloping channel formation with strong volumes. RSI (Relative Strength Index) is placed above 70 levels which suggest a strong build-up in momentum on the monthly chart. Hence, any pullback on the lower timeframe should be taken as buying opportunity,” Jignesh Pandya, Sr. Research Analyst at Monarch Networth Capital Limited said.

Since March 2020 prices are rising in higher top higher bottom formation on the weekly charts, and if we look from Elliot wave’s perspective the whole formation is impulsive and currently, prices are placed in wave 4 of next higher degree wave 3.

“Prices are likely to travel towards Rs 213 – 240 levels going forward in the form of wave 5 of next higher degree wave 3,” said Pandya.

Prices are consolidating in a narrow downward sloping formation marked with W-X-Y-X-Z and the whole formation is part of wave 4 on the daily chart.

“Prices are taking support on the lower band of rising channel formation and recently we have seen price breakout from the consolidation which suggests the start of the up move in the form of wave 5,” says Pandya.

He recommends investors or traders to buy the stock at the current market price or on dips keeping a Stop loss at 163 and a target of Rs 213 – 240 levels.

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