Chart Check: 140% in a year! Uptrend intact in this commodity chemical company

Deepak Fertiliser and Petrochemical Company, part of the commodity chemical space, hit a fresh record high in October 2022 but technical indicators suggest that the rally is not over yet.

The stock with a market capitalisation of more than Rs 13000 crore hit a record high of Rs 1,061 on 21st October 2022. The stock has been in a steady uptrend in the past one year.

It rose more than 15% in a week, and more than 50% in 3 months. From a 1-year perspective, it rallied more than 140%.

Tracking the momentum, prices gave a breakout from a pennant pattern indicating the continuation of the prior uptrend.

Prices in the latest week have given a breakout of the pennant pattern indicating a continuation of the prior uptrend. A pennant is similar to a symmetrical triangle. It is a continuation pattern and is completed in a much smaller time frame, say 10-15 days.
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The steep rise seen in the stock pushed it towards overbought levels; hence, some consolidation in the short term cannot be ruled out. Short-term traders can look to buy the sock on dips for a target of Rs 1400 in the next 3-4 months, suggest experts.

The relative strength index or the RSI on the weekly timeframe is rising. The stock also broke out from a 200-point consolidation earlier in October where Rs 1,000 acted as stiff resistance while Rs 800 acted as a support on daily charts.

RSI is at 71.6. RSI above 70 is considered overbought. This implies that the stock may show a pullback. MACD is above its center and signal Line, this is a bullish indicator.

The supertrend indicator also triggered a buy on daily charts on 17 October. Volumes are rising which signified strength in the trend.

On the price front, the stock price is trading above most of the crucial short- and long-term moving averages of 5,10,30,50,100, and 200-DMA which is a positive sign for the bulls.

image - 2022-10-25T112216.946ET CONTRIBUTORS

“While looking at the broader picture of we can spot that the steepness of the Trendline is rising which indicates acceleration in the current uptrend,” Patil, Technical Research Associate at GEPL Capital, said.

Volumes are rising steadily with the established underlying uptrend, suggesting that the Demand is pushing prices higher. “Prices in the latest week have given a breakout of pennant pattern indicating continuation of the prior uptrend,” he said.

Stock has found immediate support on every dip either from 13-week EMA or the accelerating trend line.

The gap formed in the first week of August 2022 remains unfilled till date, indicated as a breakaway gap that usually forms at the beginning of the trend.

“Looking at the ratio charts versus Nifty, Deepak Fertilisers can also maintain its outperformance from the current level. RSI Plotted on the weekly timeframe is rising and have shown a range-shift reflecting rising momentum in the stock,” added Patil.

“Going ahead, we expect the prices to move higher till the level of 1400 in next few months, where the stop loss must be Rs 880 strictly on the closing basis,” he recommends.

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)

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