Two premium realty stocks set for Bullish Reversal on the charts – Stock Insights News

The real estate sector has long been recognised for its volatility in the stock market. Realty stocks tend to move aggressively in either direction—rallying or falling by 20-30% in a single move when in trend. However, the same level of intensity can be expected in reversal moves, with stocks bouncing back in a similar manner regardless of the benchmark index’s performance.

Among the premium realty stocks currently showing signs of a trend reversal are DLF Ltd. and Godrej Properties Ltd., both of which display technical patterns that point toward a possible upward trajectory.

DLF Ltd. is one of India’s largest and most renowned real estate companies, with a diverse residential, commercial, and retail portfolio. Known for its high-quality developments and strong presence in major cities, DLF has established itself as a key player in the Indian real estate market.

DLF daily chart

Source: TradePoint, Definedge Securities

DLF’s stock price has seen a significant correction in the past 10 months, sliding from an all-time high of Rs. 967 to Rs. 650. This correction represents a decline of nearly 33%, which many investors may see as a sharp pullback.

A Megaphone pattern has formed on the daily chart, which is often considered a signal of potential price reversals. This pattern, also known as an expanding triangle, is characterised by increasing volatility, where the price swings in both directions before eventually consolidating into a new trend.

The stock price has currently reversed from the support zone of Rs.653 and is approaching the Rs.700 mark. The immediate resistance level is positioned at Rs. 800, representing a potential upside of over 15% from the current price of Rs. 690.

The positive divergence on the Relative Strength Index (RSI) adds further conviction to the reversal. The RSI, at the support level of the Megaphone pattern, is showing a bullish divergence, indicating that the downward momentum is weakening and buyers could start to gain more influence. This signals that the probability of a reversal is high, making DLF a stock worth watching in the coming months.

Godrej Properties Ltd. is another top-tier player in the Indian real estate market. It is part of the prestigious Godrej Group, a conglomerate known for its legacy in various industries. The company develops residential, commercial, and township projects across major cities in India. Godrej Properties has a reputation for delivering high-quality and innovative projects, which has helped it build a strong brand presence in the real estate sector.

Godrej Properties’ stock price has also faced a significant correction in recent months, plummeting by 44% from its recent high after forming a double-top pattern. The double top is a bearish chart pattern that typically signals a trend reversal after an extended upward move. However, despite the sharp decline, there are signs that the stock may be preparing for a reversal.

Godrej Properties weekly chart

Source: TradePoint, Definedge Securities

One of the key technical factors supporting a reversal is that the stock is stationed at the 200-week exponential moving average (200WEMA) channel. The 200WEMA is a long-term trend-following indicator that smooths out price fluctuations over time and often acts as a dynamic support or resistance level. In this case, Godrej Properties’ stock price is nearing the lower boundary of the 200WEMA channel, which has historically acted as a key level of support.

Additionally, the 61.80% Fibonacci retracement level, a widely used tool to identify potential reversal points, coincides with the 200WEMA channel. Fibonacci retracements often predict areas where an asset may reverse direction after a significant move. The fact that the 61.80% retracement aligns with the 200WEMA adds another layer of validation to the potential for a reversal in Godrej Properties.

Another encouraging sign is the positive divergence in the RSI at the support zone. Like with DLF, this divergence indicates that the stock momentum is weakening to the downside, and the bears may soon lose their grip. The combination of the 200WEMA support, the Fibonacci retracement level, and the positive RSI divergence increases the probability of a potential reversal, making Godrej Properties an attractive stock to watch for recovery.

The Risk

Both DLF and Godrej Properties are showing strong technical setups that suggest they may be at the beginning of a potential upward reversal. While realty stocks are notoriously volatile, traders should understand the risk and trade with affordable stop-losses in both stocks.

Disclaimer

Note: We have relied on data from throughout this article. Only in cases where the data was unavailable have we used an alternate but widely used and accepted source of information.

The purpose of this article is only to share interesting charts, data points and thought-provoking opinions. It is NOT a recommendation. If you wish to consider an investment, you are strongly advised to consult your advisor. This article is strictly for educative purposes only. 

Brijesh Bhatia has over 18 years of experience in India’s financial markets as a trader and technical analyst. He has worked with the likes of UTI, Asit C Mehta, and Edelweiss Securities. Presently he is an analyst at Definedge.

Disclosure: The writer and his dependents do not hold the Stocks discussed in this article. However, clients of Definedge may or may not own these securities.

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