Technical chart: Is this the right time to buy Vodafone Idea shares?

Post the Government of India approved to convert interest dues into equity holding, shares of Vodafone Idea noticed a sharp surge on Monday. The stock closed 20 per cent higher, with daily volumes hitting a one-year high. 

However, on Tuesday the share price took a hit losing 3.50 per cent in the morning intraday deals, signalling a reversal right near its most crucial moving average. 

The question on the dalal street is –Will Government move provide booster dose to the Vodafone Idea shares, which have immensely underperformed in the recent months? The stock trades 32 per cent lower from its 52-week high of Rs 11.65 and has failed to retrieve back to 2021 highs of Rs 16.80 per share; the upside rally that prompted a positive stance.

Technically, the Vodafone Idea share is still struggling to overcome the hurdle of the 50-monthly moving average (MMA), which it breached in 2015 and have been on a downward spiral since then. It did make attempts to conquer the same, but botched, resulting in even more weakness.

Even in 2021, when the stock reflected a breakout of several months of sideways move, it failed miserably to cross its 50-MMA placed at Rs 17.75 levels. This ineffectiveness led stock price to tumble to Rs 4.55, a decline of nearly 72 per cent. 

Back in 2012, when the stock climbed over the same average, the stock price doubled in three years. The 50-MMA has become a decisive indicator for the shares of Vodafone Idea. 

Moreover, on a short-to-medium term weekly scale, the stock is unable to add follow-up buying when it crossed the 200-weekly moving average (WMA). Investor community considers the 200-WMA and 200-day moving average (DMA) as their prime indicators to identify bullish and bearish trend. 

Despite a strong move on Monday, the stock failed to definitively cross the 200-DMA set at Rs 8.60 level.  While the momentum experienced a bullish push, the counter could not raise more strength to dismantle the higher selling pressure. 

On the daily chart, the Relative Strength Index (RSI) has elevated above the oversold territory, suggesting of a positive bias, but the momentum indictor, Moving Average Convergence Divergence (MACD), still trades beneath the zero line. The stock is yet to regain the hold of the upward trend, and the technical signals have not confirmed the up move. 

Only a robust close over the 200-DMA could spark a fresh upside. The price needs to sustain over the hurdle to develop underlying strength. Only then could the price successfully aim for higher levels. The next immediate barrier is at Rs 10.50 levels.

Stock shall see a turnaround in the sentiment when 50-MMA currently positions at Rs 9.35 gets surpassed on the monthly time frame. This could mean, the stock has built enough strength on the bigger time frame and is ready to move higher. When this happens, the stock can easily jump in the direction of Rs 20. CLICK HERE FOR THE CHART