Bharat Forge gives ascending channel breakout
Bharat Forge Limited is a Pune-based company engaged in automotive, power, oil & gas, construction and mining, locomotive, marine and aerospace industries. Recently, German authorities imposed a penalty of 32 million Euros on its three subsidiaries in relation to unfair trade practices. Given the total quantum of penalty is to the tune of 32 million Euros (approximately Rs 300 crore), it is expected that the payout quantum would be progressively gradual in nature. Further, there might also be an exceptional charge of Rs 30 crore, Rs 60 crore and Rs 70 crore for FY21E, FY22E, FY23E, respectively. According to ICICI Securities, this might lead to a downward revision of its earnings estimates by nearly 10 per cent in FY22E and about 7 per cent in FY23E. However, the valuation multiples remain the same that is 30x price to earnings (P/E) on FY23E revised EPS of Rs 17. Having said that, on the technical front, this stock gave an ascending channel breakout on weekly charts.
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Key Takeaways
1. Fundamentally, the stock might face some setback.
2. Technically, the stock gave ascending channel breakout on weekly charts.
3. There is a possibility of stock witnessing pullback in the range of Rs 560 to Rs 580.
4. Support and resistance are placed at Rs 535 and Rs 610, respectively.
5. Only aggressive traders should consider trading in this stock and keeping the stop loss tight.
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The above is the price chart of Bharat Forge on the weekly timeframe. As we can see it gave an ascending channel breakout with the spike in volumes. However, this stock is indeed likely to witness a pullback in the range of Rs 560 to Rs 580. Further, its major supply turned demand zone is between Rs 535 to Rs 550. Before breaking out in December 2020, the stock has adhered to this demand and supply zone. Therefore, it is below this range the view would turn bearish. We would urge only aggressive traders to consider investing in it and that too on a pullback. Also, they should keep their stop loss tight.
Disclaimer:
This article is just for understanding purposes and should not be considered as a recommendation. Readers are advised to do their own research before making any investment decision. Further, DSIJ and its authors are not responsible for any kind of losses incurred.