REC gives trendline breakout

The stock of REC Ltd has given a downward sloping trendline breakout on Friday, formed by connecting swing highs from July 16, 2019. The breakout was supported by strong volumes. Additionally, the stock formed a sizeable bullish candle on breakout day, which adds strength to the breakout.

With this trendline breakout on Friday, the stock has also managed to close above its weekly pivot and short and long term moving averages, i.e. 20-day EMA, 50-day EMA and 100-day EMA. From the momentum indicators perspective, the 14-period daily RSI is quoting at 57.43 and it is in rising trajectory, which suggests a bullish bias. The daily stochastic oscillator is also suggesting some bullish strength as %K is above the %D. The momentum indicator MACD line has crossed above the signal line, which resulted in the histogram turning positive. Moreover, a positive divergence was also spotted at the daily time frame on the RSI, which suggests limited downside. A positive divergence occurs when the price is making a lower low, while the RSI forms a higher low.

Going ahead, the stock has immediate support in the zone of Rs. 145-144 as 50-day EMA and 100-day EMA is placed in that region, while the major support is placed in the zone of Rs. 140-139 as it is the confluence of long term 200-day EMA and upward sloping trendline. On the higher side, any sustainable move above the level of Rs. 151.50 is likely to open up gates for further rally towards the levels of Rs. 155, followed by Rs. 169.

On Friday, the stock of REC closed at Rs. 150.70 per share, surging 6.24 per cent against previous close. The stock opened at Rs. 145.20 per share and hit an intraday high of Rs. 151.35 and a low of Rs. 144.55 per share on BSE.