Last Updated on Feb 28, 2023 by Gayathri Ravi

Markets continued to remain weak, and correction got extended. But as I always say, during the correction, we get the best opportunity to accumulate quality counters near supports, and we get the most favourable risk-reward too. One such counter is Pidilite Industries. Let’s dive deep into the higher timeframe charts and understand the formations better. 

loading widget to trade PIDILITIND

Monthly: Price action

pasted-image.tiff

What a stupendous rally!


An interesting part to note is that post-2008 correction, there is no lower bottom compared to the previous bottom. Price continued its uptick and also held trend line support (highlighted in yellow colour) since 2014. Presently it has again tested the same trend line. An interesting part to observe is that the volumes are very less in the correction phase, confirming a good buying opportunity as there was a lack of participation in correction. 

Weekly: RSI

pasted-image.tiff

The weekly chart shows better formation on recent happenings. Price has reached the support zone and consolidating near the same zone for 3-4 weeks, and now we are also heading for month end. Where the price is making higher bottoms, Relative Strength Indicator (RSI) is making lower bottoms, confirming “Hidden Bullish RSI divergence”. As per the set-up, one can take advantage of recent price corrections and accumulate stock. 

Weekly: Price and Fibonacci

pasted-image.tiff

The price is clearly holding a trend line since 2019. An interesting part to observe here is that trend line support is just coinciding with 78.6% of the last advance. 2190-2200 zone can be considered as an inflexion point, and the said zone may offer very strong support to the counter. 

Weekly: Exponential Moving Average

pasted-image.tiff

Moving averages need to place on the logic of trial and error. Very clearly, the price crossed 120 weeks’ Exponential Moving Average (EMA) in 2009 and has remained above that since then. In fact, the price precisely took the support of the same moving average 5 times in the past. Presently it has reached the same moving average again. Well, one can’t afford to ignore the counter. 


Weekly: Ichimoku

pasted-image.tiff

Ichimoku is an equilibrium indicator. Since 2017 (In fact, even before 2017), the price has remained in an uptrend, which is even confirmed by Ichimoku. Multiple times price has taken support of the Kumo cloud. Though the present price has breached the cloud (which happened even in the past), the future cloud remains bullish. Tenkan Kijun is flat, and Chikou Span is well above the cloud, highlighting the possibility of sideways consolidation, if not immediate recovery. 

Daily: Price action + RSI + MACD

pasted-image.tiff

A clear downtrend can be seen on the daily chart. The price has reached the previous low on the daily chart and seems to be taking a pause. At the same zone, RSI is making the higher bottom, and so is the case with Moving Average Convergence Divergence (MACD) too. Both indicators confirm “bullish divergence”. Along with other higher timeframe observations, this can be taken as an early sign of bottoming out. 

Ratio Chart: Pidilite Industries Vs Nifty

pasted-image.tiff

This is the ratio chart of Pidilite Industries and Nifty. Pidilite Industries has very clearly outperformed Nifty since 2013-2014. Recently the ratio chart has formed a base, and that has been tested 3 times so far and bounced nicely (keeping the trend intact). The present set-up is again highlighting the likely outperformance of Pidilite Industries in the time to come. 

Putting it all together

Looking at monthly price action using a multi-year-old trend line, Fibonacci support of 78.6% alongside trend line support on weekly, and hidden RSI bullish divergence, Pidilite Industries seems to be a perfect bargain buying opportunity from a long-term perspective. The 120 weeks’ EMA, Ichimoku on weekly, bullish RSI and MACD divergence on the daily chart suggest the same.

The ratio chart of the stock with Nifty also suggests a possible outperformance of the counter from the present zone. One can keep an eye on reversal signs and think of positional bet on the discussed counter. 
Statutory Disclosure: Kindly note that this update is only for educational purposes. It is safe to assume that my personal position, my fund’s position, my client’s position and my relative’s position may be open on the counter. Prefer to take the advice of your financial advisor before initiating any position.

Kunal Rambhia
Subscribe
Notify of
guest
0 Comments
Inline Feedbacks
View all comments

The blog posts/articles on our platform are purely the author’s personal opinion and do not necessarily represent the views of Anchorage Technologies Private Limited (ATPL) or any of its associates. The content in these posts/articles is for informational and educational purposes only and should not be construed as professional financial advice. Should you need such advice, please consult a professional financial or tax advisor. The content on our platform may include opinions, analysis, or commentary, which are subject to change, without notice, based on market conditions or other factors. Further, the use of any third-party websites or services linked on the website is at the user's discretion and risk. ATPL is not responsible for the content, accuracy, or security of external sites. Investments in the securities market are subject to market risks. Read all the related documents carefully before investing. Registration granted by SEBI, membership of BASL (in case of IAs) and certification from NISM in no way guarantee performance of the intermediary or provide any assurance of returns to investors. The examples and/or securities quoted (if any) are for illustration only and are not recommendatory. Any reliance you place on such information is strictly at your own risk. In no event will ATPL be liable for any loss or damage including without limitation, indirect or consequential loss or damage, or any loss or damage whatsoever arising from loss of data or profits arising out of, or in connection with, the use of this website.

By accessing this platform and its blog section, you acknowledge and agree to the Terms and Conditions of this website, Privacy Policy and Disclaimer.