Tuesday, February 16, 2016

Petronet LNG

The stock of Petronet LNG encountered a key resistance at Rs.266 on February 8 and started to decline. Last week, it tumbled 8 per cent forming a bearish engulfing candlestick pattern in the weekly chart.

Since late December 2015, the stock has been in a sideways consolidation phase in the band between Rs.240 and Rs.266. This sideways movement has resulted in the formation of a double top pattern, a bearish reversal pattern with neckline at Rs.240. The stock is now testing this neckline with negative bias.

An emphatic downward break of the chart pattern will strengthen the downtrend. In this case, the intermediate-term uptrend that has been from the August low of 2015 will be under threat.

Downside price target of the pattern is Rs.215. Further decline below Rs.215 can drag the stock down to Rs.200 or even to Rs.185 in the medium term.

As the stock is trending downwards and there is risk of it declining further, you can consider exiting it at the current level and re-entering at lower levels. The long-term trend has been up for the stock from its January 2014 low of Rs.102.

This uptrend will remain in place as long as the stock trades above the key trend-deciding level of Rs.185. Investors with a long-term perspective can wait for a decline and buy the stock with a stop-loss at Rs.180. Key resistances above Rs.252 are at Rs.265 and Rs.272.

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