Saturday, July 30, 2011

Reliance Industries Limited - Dewang K Mehta


Dear All,

According to me, if there is one stock that impacts the Nifty single handedly then it would be Reliance Industries Limited. This stock has been in a large trading range which can be broadly stated from 850 to 1250 since the start of 2009.

Stocks that stay range bound for such a long time are best traded by the book wherein you buy in parts at supports and sell in parts at the resistance levels. So looking at this range ideally buying should start below 910 levels till 800 and selling should start above 1000 levels going till 1100.



We have highlighted the support and resistances zones in this chart too with black and red highlights respectively. With the S&P CNX Nifty placed in its support zone and with Reliance Industries too entering the lower band of its support with a close around 827 I believe that this stock should soon begin to impact the movement of the Nifty.

As mentioned earlier the prudent bet is to go long Reliance at 827 with a stop of 794 and a target of 958 for starters. However I would be ultra-careful while buying this stock because usually when a stock breaks such a large consolidating / trading range the up or the down moves are too heavy, too fast and too high. So even if you do decide to invest, buy in small quantities with the willingness to average it below 700 levels.


Thanks,
Dewang K Mehta
DENIP Consultants 
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