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Techno Derivative Stock Idea: Buy Hindustan Unilever and hold for 1-3 months

HDFC Sec | 19 Jan, 2017  | Follow Author | Add to my Favourites 
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After falling from a high of 954 touched in September 2016, Hindustan Unilever touched a low of 781 in Dec 2016. These lows also  coincide with  previous  intermediate  lows  touched  in  January  2016,  indicating  a  double  bottom  has been  formed.  The stock has been steadily rising in the last few weeks from these lows of 781.

Looking at the chart above, we can notice that in the last two sessions the stock has risen sharply and broken above its recent trading range and intermediate high of  856. This  indicates a reversal of the recent downtrend and  a confirmation of a new intermediate uptrend.

Technical indicators are currently giving positive signals as the stock trades above the short term (13 day SMA), medium term (50 day SMA)  and  Long  Term  (200 day EMA)  moving averages.  Momentum indicators like the 14-day  RSI are in rising mode and not yet overbought.

Derivative  indicators  too are supporting the stock’s current uptrend. As can be seen from the chart above, the OI level has been steadily rising in the last few weeks (See the yellow line). Combined with the rising price over the same time period, it indicates a gradual accumulation of long positions.

The OI PCR too is in rising mode after making a double bottom (See the red line). A rising trend  in the PCR indicates the end of a bear phase and a rally is on the cards as traders hedge their longs with puts and more put options are written easily (See the red bar chart above).

The  IVs  too  have  spiked  in  the  last  few  sessions  indicating  an  increase  in  trading  interest.  We  believe  the  stock  has  the potential to move higher in the coming  weeks and therefore recommend a buy  at CMP and adding more on dips. Our entry levels and targets have been mentioned above.

HUL Daily Chart with Volumes, OI, IV, PCR and 14-day RSI


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Disclaimer: The author has taken due care and caution to compile and analyse the data. The opinions expressed above are only the views of the author, and not a recommendation to buy or sell. Neither the author nor accept any liability whatsoever arising from the use of any of the above contents.

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