Adani Power shares rose 300% from 52-week low but overbought on charts; more gains likely?

Shares of Adani Power Ltd have recovered over 300% from their 52-week low this year. The Adani Group stock, which fell to a 52-week low of Rs 132.55 on February 28, 2023, ended at Rs 562.05 on December 7, gaining 324% from the yearly low. On December 6, the stock touched its fresh 52 week high of Rs 589.30 on BSE. In the last session, the Adani Group stock rose 0.27% to close at Rs 562.05. The stock hit an intraday high of Rs 574.95 on BSE. Market cap of the firm rose to Rs 2.16 lakh crore. The firm saw 26.40 lakh shares changing hands amounting to a high turnover of Rs 148.77 crore on BSE.

Adani Power stock has risen 104.53% in six months and gained 88.51% this year. Market cap of the firm rose to Rs 2.16 lakh crore. The Adani Group stock has a beta of 0.4, indicating very low volatility in a year.

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Deven Mehata, Equity Research Analyst, Choice Broking said, “Adani Power is currently positioned at Rs 560.45 levels, in proximity to its all-time high at 589.45. Over the past three weeks, the stock has consistently formed higher highs and higher lows on the weekly charts, showcasing a positive trend. Trading above key moving averages, it demonstrates robust strength in its overall trend.”

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However, Mehata advised investors to exercise caution since the stock was trading in overbought zone. “Despite this strength, caution is advised as the stock approaches an overbought condition, with the Relative Strength Index (RSI) trading at Rs 84 levels. This suggests potential vulnerability to a correction. Notably, a substantial support zone lies at Rs 410 levels, approximately 27% below the current price. Short-term traders who entered at lower levels are recommended to book profits, considering the historical significance of the support at Rs 410.”

Abhijeet from Tips2trades said, "Adani Power looks bullish & extremely overbought on the Daily charts with next resistance now at Rs 623. Investors should book profits at current levels as a Daily close below the support of Rs 530 could lead to a target of Rs 416 in the near term."

The share has zoomed 30% in the last five sessions amid the BJP winning three state polls recently which added to the gains of the Adani Group stocks. The assembly poll victory fueled hopes that BJP would retain power in the General Election to be held in 2024. The big up move after the poll results which started on Monday (December 4) continued on Tuesday after the Bloomberg reported a US agency concluded accusations against the Gautam Adani-led conglomerate weren’t relevant.

According to the Bloomberg report, a senior US official stated that the US government deemed Hindenburg Research's accusations of corporate fraud against Indian billionaire Gautam Adani irrelevant. The decision was made before approving an extension of up to $553 million for his conglomerate's container terminal project in Sri Lanka.

In terms of technicals, the relative strength index (RSI) of Adani Power stands at 85.5, signaling it's trading in the overbought zone. Adani Power shares are trading higher than the 5 day, 20 day, 30 day, 50 day, 100 day and 200 day moving averages.

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