IRFC on the verge of a breakout, signals buy

Technical analysis suggests that Indian Railway Finance Corporation (IRFC) stock is on the verge of a consolidation breakout. According to Sudeep Shah, Head of Technical and Derivative Research at SBI Securities, “On Wednesday, the stock witnessed above 50-days average volume. This indicates accumulation before the actual breakout happens.”

As of 10:24 am on January 11, IRFC was trading at Rs 105.80 on the National Stock Exchange, up 3 points, or 2.67 percent, from the previous close

Technical chart of IRFC showing that it’s in an uptrend the stock is firmly, trading above both its short and long-term moving averages | Source: SBI Securities

“On Wednesday, the stock witnessed above 50-days average volume. In addition, it has formed a sizable bullish candle on Wednesday. The Mansfield Relative Strength is above the zero line, indicating outperformance compared to the broader index, i.e., Nifty 500,” stated Shah.

From a technical perspective, Shah highlights that the stock is firmly in an uptrend, trading above both its short and long-term moving averages, which are exhibiting upward trends. The daily Relative Strength Index (RSI) has consistently been in the super bullish zone since December 2023. Additionally, the daily stochastic indicator reinforces the bullish momentum, further supporting the positive outlook for the stock.

The Average Directional Index (ADX), an indicator measuring trend strength, is currently on a rising trajectory on both the daily and weekly charts. “Specifically, it stands at 35.09 on the daily chart and 53.92 on the weekly chart. Typically, a level above 25 is indicative of robust trend strength, and in this case, the stock meets this criterion in both timeframes. This underscores the considerable strength in the ongoing trend, suggesting a notable and sustained directional movement in the stock,” added Shah.

These technical factors are aligning in favour of bulls. Hence, Shah recommends accumulating the stock in the zone of Rs 102-104 with a stop loss of 98. On the upside, it is likely to test the levels of Rs 110, followed by 115 in the short term.

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