In late December 2020, I have shared a post highlighting Nifty FMCG could the star sector for 2021. The sector is performing on the expected line and reiterate my view, one must focus on this sector which has a high potential and probability to outperform the benchmark index. If u missed or haven't read the post here is a link
CNXFMCG : Breakout from Multi-Month Consolidation !!
From a similar space, the stock which shows strong potential to perform well in FY 2021-2022 is PIDILITE INDS based on the overall chart structure and relative strength which we shall discuss ahead as we progress to the post.
The first chart attached below is the weekly chart of Pidilite Inds, which shows the stock is forming series of Higher High and Higher low which defines the Uptrend in the stock. From Aug 2020 to early Jan 2021 stock witnessed a strong and steady rally surpassing its previous supply zone of 1700-1660 and printing new life highs. However, post that price turned sideways witnessing price and time correction which is quite normal to see after a strong runup. The most important and positive point which indicates strong strength in price the consolidation happened above its previous supply zone and with the least retracement (less than 38.2% of its previous rally from 1307 to 1842).
From the above chart, it is evident that recently price gave a breakout from the consolidation pattern which is a bullish signal and indicates price to attract fresh momentum and likely to resume its prior trend. The indicator attached below is Directional Movement Index (DMI) which is complimenting the bullish view on price. Historically it has been observed when DI+ line rises and sustains above 20 the price sees a strong upside trend and following the historical instances currently DI+ line has surpassed above 20 levels and looking at the chart structure it is expected to sustain above the same. Thus if history repeats we shall witness strong upside momentum in the coming weeks.
The other chart attached below is the Relative chart or Ratio chart of Pidilite Inds and Nifty. This chart generally helps the strength in the stock compared to the index. If we overall take of the chart its clearly shows a strong uptrend and has formed series of Higher high and higher low. Apart from that, the interesting observation I witnessed in the ratio chart is that it has dropped to an important Moving average support where historically it has provided strong support and ratio has bottomed out near the same. Thus if the history repeats and the Ratio chart forms a bottom a near the same we can expect the stock price to outperform the Benchmark index in coming weeks.
Thus from the above Technical Studies, my insight is Pidilite Inds likely to have better FY 2021-2022 and stock to scale new highs in the following year. The view discussed above if unfolds well on the expected line the stock has the potential to rally higher towards 2030-2200-2550 levels. On the lower side, the strong support is placed near 1760-1680 levels.
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