CNXFMCG : Breakout from Multi-Month Consolidation !!
The Pandemic, Historic, Scary, Revolutionary (or any other name which you could think of), 2020 year is coming to an end and has been ending on a better note especially for the Stock Markets and for many investors, traders. And like me, everyone would wish such outperformance should continue for the coming year as well.
From such a thought, was analyzing the different sector's long-term charts which shall continue this rally and has a better risk-reward opportunity. To be honest, as most of the sectors are trading near fresh highs the charts are very robust, strong, and attractive. However, after analyzing most of the sectorial charts, the CNXFMCG index chart caught my attention and I believe this sector has much more steam left and could be one of the sector I would like to bet on for 2021.
The weekly chart of CNXFMCG attached below displays the perfect example of the "Law of Polarity" theory. The simple yet powerful concept provides strong support/resistance, trend strength and if analysis proved right it provides the best entry opportunity with favorable risk-reward in place. Also, from this chart, it shows for a better perspective it's important to focus more on the left-hand side of the chart rather than focusing more on the present chart scenario.
From the above chart, it is evident that in most scenarios the earlier resistance has turned into support and the price enters into a new trading range zone. From the breakout since 2005, this scenario has continued so far. Every consolidation breakout later has turned into a demand zone and price rise higher entering into a new trading range zone. The same pattern or same scenario have developed currently. This month CNXFMCG index has witnessed a breakout from the long multi-month consolidation range which continued for more than two and a half years. So taking the reference point from the historical chart it is possible that CNXFMCG has entered into a new trading range and could be at the beginning of a new bull run. Going forward 33200-32500 would act as strong support for the CNXFMCG index.
Looking from the price pattern point of the view, the CNXFMCG index has registered a breakout from the long sideways parallel channel which continued for more than two and a half years with supportive momentum which is a bullish signal and compliments bullish view on price.
Another chart displayed below is the Ratio Chart of CNXFMCG and Nifty 50. The Ratio chart denotes, it has reversed taking support from the demand zone. If the ratio line continues to hold this support and rises higher, it shall indicate that the CNXFMCG index shall outperform the benchmark index in the coming months. Looking at the chart it suggests the ratio line has the potential to inch higher towards the upper shaded zone which is placed around 2.85-3 levels. The momentum indicator has surpassed oversold territory with a positive crossover which is a bullish signal and compliments a bullish view on price.
From the above Technical studies, I believe 2021 would be more better year for CNXFMCG index and related stocks. My view holds true till the Index does not close below the mentioned support zone and To the extent till the Ratio line chart does not breakout the support zone.
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Do comment the STOCK you feel can outperform in 2021 from FMCG basket.
