Last Updated on Oct 19, 2022 by
This article is authored by Kunal Rambhia, a fund manager at The Streets, a private fund. He has been in the equity market since 2010, performing various roles such as Associate Research Analyst, Research Analyst, and Associate Portfolio Manager. He has media appearances with CNBC and ET NOW. Kunal is also a visiting faculty in multiple colleges.
Folks, it’s an extremely turbulent time for mankind and so is it for the market. Let’s take a pause to pray for a stable situation (soon) for all those who are facing scary times due to geopolitical stress. As an extension of the geopolitical tensions, financial markets across the globe have been extremely volatile these days. There has been a bloodbath on the financial streets. But that’s where we can find good positional investment bets.
Though wheat prices have shot up in recent times in international markets, I firmly believe the assumption of technical analysis, “Market discounts everything”. Also, when stocks decline, indicators may not always support the view because they are based on price action. So, in this write up, the focus is mainly on price action. Let’s take a deep dive into the price formation of Britannia.
Table of Contents
Weekly line chart
The stock has clearly been in an uptrend since 2010. The steepness changed somewhere from 2015 onwards. Yellow coloured trendline offered support many times in the last 7 yrs. Fall of 2020 also respected the support offered by the trendline. Presently, the stock has reached near the same trendline (due to sideways behaviour).
Zoomed chart of the weekly timeframe suggests that price is simply consolidating since June 2020. If we look at a little longer formation, the 3,350 price zone has been a very important one since August 2018. This zone has also witnessed a very clear change in polarity, so the zone which was offering resistance earlier is now offering support to the counter. This support zone coincides with the longer trendline support (shared in the previous chart), offering an inflection point.
Weekly chart with Exponential Moving Average
If we look at the 200 period’s Exponential Moving Average on a weekly chart, it has offered support to the counter since 2006 (I have not taken the entire data because it was turning clumsy). The two most recent instances show that the stock delivered fantastic returns after taking support from the moving average support zone. Moving average is placed 150 points away from the present levels. One can certainly consider this zone for accumulation.
Very clearly, prices are down almost 20% from the peak. In the last session, the stock has shown some kind of bullish candle, giving the hope of holding a support zone. The support zone is also coinciding with yellow trendline support. Momentum traders should wait for falling wedge (kind of) formation breakout (price crossing resistance trendline approximate zone being 3,550). One can even consider accumulating counters near the same support zone.
Ratio chart of Britannia and Nifty FMCG
The weekly ratio chart of Britannia and Nifty FMCG was clearly downward sloping since December of last year. It stopped falling and is now within curve consolidation. Also, RSI showed bullish divergence, which confirmed the minimum downside. Going forward, there is a bright possibility of outperformance by Britannia among FMCG pack composition.
Putting it altogether
Looking at trendline support on longer and zoomed weekly charts, 200 EMA on the weekly chart, alongside trendline support on daily timeframe chart, it seems that this growth counter is available at bargain buy level for accumulating in the portfolio for long term. The ratio chart is supporting possible outperformance going forward.
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 in the counter. Prefer to take the advice of your financial advisor before initiating any position.
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