Multi-Year consolidation breakout.

Ambuja Cements - Long awaited 7 years consolidation breakout.... 

The Cement sector stock has been on roll and most of the stock has witnessed a breakout on the long-term chart. Almost all stocks from this space have an attractive and promising chart setup and indicate after long hibernation mode this sector stocks are ready for some good upmove in the coming weeks and months. There are a couple of stocks from this space that have a bullish chart and one such stock which I choose this week is Ambuja cement, the technical studies ahead have been discussed below.

The chart attached below is the monthly chart of Ambuja Cements which highlights the breakout from the long sideways range. The last year has been a great year for the stock where the price rallied from 180 to 300+ levels. The stock has been in the sideways range from last more than 7 years and this year price has surpassed the multi-year supply zone 275-290 which is a bullish signal for a medium-term trend.

The breakout from prolonged consolidation indicates the stock has entered into a new trading range and the price likely to stage higher in coming weeks and months. The positive point which provides confidence and increases the reliability of the breakout is the Price-Volume action. The Big size and above-average volume bars with rising price trends indicate big players showing interest at the elevated levels and such behavior displays strong strength in the trend. 

The second chart shown below is the ratio chart of AmbujaCem/NIfty which generally helps to gauge the strength in the stock in comparison to the Benchmark Index. After analyzing the absolute chart of the stock it is also important to have a look at the relative chart for further confirmation and to increase the odds in our favor. 

The Ratio chart as well has been in moving into the parallel channel for the last many years and recently its has reversed taking support around the lower end of the channel and going forward it is expected to scale higher minimum to test the median line of the channel. Also, near the bottom, RSI has developed bullish divergence which compliments bullish view and indicates price to outperform benchmark index in coming weeks and months.

Thus from the above analysis, I sense Ambuja Cement is likely to do well in the coming weeks and the view discussed above if materializes well on the expected line, the stock has the potential to test 350-387-444 levels in the short to medium term. While on the lower side, the strong support zone is placed around 287-275. 

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