Buying ideas for Aug 5: Asian Granito, IDFC First Bank, Borosil Renewables

Asian Granito India

Asian Tiles has recently confirmed a significant breakout from a long-standing falling trend line, surpassing the Rs 86 mark. This trend line breakout indicates a potential shift in the stock's price trajectory, signaling the end of a downtrend and the possible beginning of an upward move.

In addition to this technical signal, the stock has formed a pattern resembling a bullish head and shoulders. This pattern is typically considered a reliable indicator of a reversal from a downtrend to an uptrend.

The breakout and pattern formation are supported by increased trading volumes, suggesting strong buying interest, and the positive alignment of momentum oscillators, which reflect increasing bullish momentum.
 

 

Given these positive technical indicators, traders are advised to buy Asian Tiles within the price range of Rs 88 to Rs 84. To manage risk, a stop loss should be placed at Rs 76 on a closing basis. The anticipated price targets for this trade are Rs 101 and Rs 106, which are expected to be reached within the next 1 to 3 months.

Borosil Renewables

The stock has been in a consolidation phase, consistently trading above its 200-day Exponential Moving Average (DEMA) around the Rs 480 mark for several months. This period of sideways movement indicated a phase of indecision or accumulation among market participants.

Recently, however, the stock experienced a breakout from this range, signaling a potential shift in market sentiment and momentum. This breakout is further validated by a positive crossover of moving averages, suggesting increasing bullishness.

Additionally, a chart pattern resembling an inverse head and shoulders has formed, which is typically considered a bullish reversal pattern. This combination of technical indicators suggests a strong potential for upward movement.

Consequently, traders are recommended to buy Borosil Renewables within the price range of Rs 544 to Rs 536, with a protective stop loss set at Rs 480 on a closing basis. The anticipated targets for this trade are Rs 630 and Rs 660, expected to be reached over the next 1 to 3 months. 

IDFC First Bank

After peaking around the Rs 101 mark in September 2023, the stock underwent a significant correction, dropping by 30 points, equivalent to a 29.34 per cent decline from its high. This decline brought the stock down to a support level near the 0.618 Fibonacci retracement level of its prior uptrend, which spanned from Rs 53 to Rs 101.

The 0.618 retracement level is often considered a critical support level in technical analysis, indicating a potential reversal point. At this level, a bullish bat pattern has also emerged, which is a harmonic pattern that typically signals a potential bullish reversal.

The confluence of these technical indicators—support at the key retracement level and the formation of the bullish bat pattern—suggests that the current price levels are favorable for buying.

Therefore, it is recommended to buy the stock within the Rs 72-75 range, targeting a price of Rs 84. To manage risk, a stop-loss should be set near 68.5 on a daily close basis. This strategy aims to capitalize on the anticipated reversal and subsequent upward movement based on the identified technical signals.

(Jigar S Patel is a senior manager of equity reserach at Anand Rathi. Views expressed are his own.)