Technical Bits: SRF Limited gives pennant breakout

The stock of SRF Ltd has given pennant pattern breakout on the daily time frame. The breakout was supported by strong volumes. Additionally, the stock formed a sizeable bullish candle on the breakout day, which adds strength to the breakout.

The pennant is a short-term trend continuation pattern and it has conical bodies that formed during a period of consolidation. Price consistently reaches higher lows and lower highs, creating two converging trendlines that form this conical shape. The breakout above downward sloping trendline signals that the previous uptrend has resumed.

The major trend of the stock is bullish as it is trading above its weekly pivot and above its long-short term moving averages, i.e. 20-day, 50-day, 100-day and 200-day EMAs and these moving averages are exactly in an ascending order, which suggests that the trend is strong. The 14-period RSI is currently quoting at 66.34 and it has recently given positive crossover. The stochastic oscillator is also suggesting some bullish strength as %K is trading above the %D. The ADX is very strong at 31.02. The directional parameter -DI is much below the +DI. This shows the technical strength in the stock. Moreover, the other volume-based indicators like OBV and MoneyFlow index are also very strong.

In the coming session, we expect the bias to remain positive as long as the stock sustains above the Rs. 2,860 mark. On the higher side, the level of Rs. 3,150, followed by Rs. 3,200, would be seen as the next resistance zone for the stock.

On Tuesday, the stock of SRF closed at Rs. 3,010.85 per share, surged by 4.58 per cent. The stock opened at Rs. 2,939 per share and hit an intraday high of Rs. 3,021.05 and a low of Rs. 2,857.05 per share on BSE.