Signal stock

Chart check: 40% off June lows! The stock of this brewery forms a flag pattern; what should investors do?

Khaitan, a brewery, has fallen more than 40% from its January 2022 high, but recent price action suggests it has recouped most of the losses and the momentum is here to stay.

The stock with a market cap of over Rs 15,000 crore hit a 52-week high of Rs 1,299 on January 6, 2022, but failed to maintain momentum. The stock rebounded strongly after hitting a low of Rs 731 on May 12, 2022.

The stock rebounded over 45% from the lows to close at Rs 1,066 on September 9, 2022. The price action suggests momentum is still intact.

Short-term traders can look to buy the stock now or down to a target of Rs 1,170 over the next month. A stop loss can be placed below Rs 1,015, experts suggest.

The stock recently gave a breakout from the neckline of the reverse head and shoulders pattern earlier in September and the formation of a feathered pattern on the daily charts adds to a bullish position.

The bull flag is formed in stocks with strong uptrends and are considered continuation patterns.

picture (71)Agencies

After the recent price action, the stock is trading around overbought levels, so there could be some consolidation in the near term.

The Relative Strength Index (RSI) is 70.4 and an RSI above 70 is considered overbought. This implies that the stock may show a pullback, according to data from Trendlyne. MACD is above its center and its signal line, it is a bullish indicator.

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

All beverage and distillery stocks have a strong technical structure, among which Radico stock is performing well against peers like Mc-Dowell and UBL.

“After a decent 44% decline from its high, the stock formed a bottom followed by a bullish move. The stock has formed a 137-day reverse head and shoulders pattern, this is a sign of a bullish reversal,” said Kapil Shah, Technical Analyst, Emkay Global Financial Services and Trainer – FinLearn Academy.

“Stock broke through the neckline that completes the pattern. In recent context, the stock had formed a bullish pane pattern, indicating a resumption of positive movement,” he said.

The Momentum Oscillator’s RSI reading is above 65 levels in all timeframes, implying momentum in the stock. It sails above the short-term and long-term moving averages in all timeframes, it creates a positive view of short-term traders for investors.

“Based on the above rational, the shares can be seen as buying opportunities in the range of Rs 1,066 to Rs 1,050 with a stop loss of Rs 1,015 at the close. On the high side, the index has upside potential up to Rs 1,170 within a month,” Shah recommends.

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