Liberty Shoes: Long-Term Portfolio Choice

November 25, 2013 . FundsIndia Desk

After a protracted period of consolidation, the Liberty Shoes stock appears to be gaining some upside momentum. The recent price and volume action suggests that there is buying interest in the stock. As highlighted in the weekly chart of Liberty Shoes featured below, the stock has bounced off the blue trend line and has since  seen a sharp bounce.


The stock appears to be headed to the immediate resistance at Rs.116-117 range. A breakout past this resistance could push the price to higher levels. We expect Liberty Shoes to eventually rally to Rs.183, which is the 50% retracement of the fall from Sept.2005 high of Rs.289.95 to the Oct.2008 low of Rs.32.30.

A breakout past the immediate resistance at Rs.117 would strengthen the case for a move towards Rs.183. This target of Rs.183 is meant for those who are willing to play the waiting game as itt may take a few months or even beyond for the stock to reach this target.

The positive view would be invalidated if Liberty Shoe falls below the support at Rs.88. With the stock currently ruling at Rs.102, the stop loss at Rs.88 would be too rich for comfort. Investors may therefore accumulate the stock on weakness, so that the net risk on the trade is within acceptable limit.

(The view featured here is based on Technical Analysis of historical stock price action. Please read the Disclaimer)