Technical Breakout Texmaco Rail and Engineering ... - ICICI Direct

Technical BreakoutTexmaco Rail and Engineering (TEXRAI) (CMP- | 72)Strategy: Buy Texmaco Rail & Engineering in the range of | 72–69 for a target price of | 90 with a stop loss below| 61.50 on a closing basis.Key Technical DataRecommended Price 72 - 69Price Target 90Stoploss 61.552 Week High 78.352 Week Low 45.3550 days SMA 65.4200 days SMA 58.252 Week SMA 62.5AnalystDharmesh Shahdharmesh.shah@icicisecurities.comNitin Kunte, CMTnitin.kunte@icicisecurities.comDipesh Daghadipesh.dagha@icicisecurities.comBreach of downward sloping channel signals change of guard from medium term trend perspectiveThe share price of Texmaco Rail & Engineering had been on a steady downward spiral since hitting an all-time high of| 101.40 in July 2011. The stock lost more than 50% of its value from its July 2011 high before hitting a major troughof | 48 towards mid-September 2012. The price decline since the start of 2012 had occurred in a well defineddownward trending channel formation as highlighted in the adjoining weekly candlestick chart.The bounce back post hitting the low of | 48 in September 2012 saw the stock generate a faster retracement of thepreceding falling segment, thereby signalling a change in sentiment. In the process, the stock also ventured above allits medium-term and long term moving averages. The initial up leg was followed by a round of sidewaysconsolidation just below the upper band of the falling channel. During the whole consolidation phase since October2012 till date the stock maintained a higher peak and trough formation while trading closely above its medium andlong term moving averages, which reflects the positive sentiment.The price action in the last few sessions has seen the stock venture past the consolidation range with strongvolumes, which has resulted in a breakout from the upper band of the medium term declining channel. The violationof the down trending channel backed by strong volumes indicates a shift of momentum in favour of bulls from amedium-term perspective.Positive divergence on momentum oscillatorsDuring the entire price decline since February 2012, the 14 week RSI has exhibited positive divergence as it made aseries of higher highs while prices were still in a declining mode and forming lower lows. The positive divergence onmomentum indicators suggests waning downward momentum and a potential reversal on the cards. The recentprice rise has led the RSI to move past its own intermediate resistance of 60-64 indicating strength in the currentbreakout.The measuring implication of the channel breakout i.e. the width of the channel (24 points) added to the breakoutpoint of | 67 project a medium term price target of | 91.ICICI Securities Ltd. | Retail Equity Research

Exhibit 1: Texmaco Rail & Engineering Ltd. – Weekly Candlestick ChartSource: Spider software, ICICIdirect.com ResearchICICI Securities Ltd. | Retail Equity Research Page 2

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