Reliance Power is High Potential Power Stock: Very Attractive at Current Levels, Buy on Dips

Reliance power IPO hit the markets on December 2007 and the stock got listed on all major stock exchanges on 11 February 2008. Since the listing we have seen the stock has declined significantly, as this period was of recession. Huge selling pressure was seen in the RPOWER stock, it has declined from 330 levels to 82 during this period. Also this week the stock has made a new all time low as it has broken its previous low of 82 on NSE and the price action was firmly below 82 level. So in short term we don’t see any triggers for this stock to pullback, but we do see much downside from the current levels. We are sure that this breakout has surprised many positional traders, as this stock is largely acquired by FII and mutual funds. So this is a bad news for investors in Reliance Power stock as there is much more downside opened by this breakout, but we cannot speculate on how much downside is possible from current levels. Taking a look at the technical charts of RPOWER we see that the stock has entered the bearish trend in the early January 2011 and since then the stock has witnessed selling. We don’t see any immediate pullback, as the stock has become very bearish, may be we will see some support at the 60 or 50 levels, but on charts it is still unpredictable. So our strict advice to traders is to keep looking for selling near 79 level or on every bounce as the stock in on down trend, this short positions are to be build on the RPOWER futures contracts only and high risk traders can even take positions on RPOWER put option contracts. Stop loss must be placed just above the 85 level only on closing basis, targets are 65 and 50 level in short term. Technical indicators are showing bearish momentum is shaping and will be strong in coming sessions.

Fundamentals are not that attractive for the company as, the company hold huge debt. This is a big reason to worry about the stock. For investors we advice to stay away from this stock, traders can however add the short positions to their portfolio.