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Swing Trade: Stock Low, Bulls Ready to Charge High!

Investors have made good gains over the past two months, all thanks to sectoral strength in many sectors. But some stocks did not perform well due to lackluster investor interest. While not participating in the broader market rally is a weak sign for any stock, a rally during a broader market consolidation phase is a good sign.

One stock that is coming off a nice base amid a drastic drop off the highs is NIIT Limited (NS:). The company is one of the most popular education service providers and has a particular focus on developing talent and skills. It offers multidisciplinary learning management and training solutions to companies, institutions and individuals. NIIT has a market capitalization of INR 4,752 crore and its shares are 3.36 times more volatile than the index.

During FY22, the company recorded 35.66% year-on-year growth in net revenue to INR 1,431.14 crore, but has yet to surpass its pre- pandemic of INR 2,318.66 crore in FY20. The same goes for net profit, which is up 58.15% on an annual basis to reach INR 226.19 crore in FY22, but is down noticeably from 1,327.45 crore Net profit INR recorded during FY20. But the good part is that the growth is visible in the numbers.

Surprisingly, FIIs hold a high stake of 21.7% in the company, as of June 2022, while mutual funds hold around 7.94%. These high stakes by shrewd investors are not usually seen in a small cap company.

Image description: NIIT daily chart with volume bars at the bottom

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As for NIIT’s daily chart, it’s nothing short of mouth watering for mean reversion traders. The stock has already faced a severe sell-off, falling from the April 2022 high of INR 658.65 to a low of 340.4 in August 2022. This massive drop of around 48% now appears to be over. As the stock has started to reverse its trend, high-risk traders could capitalize on this opportunity. On Friday, the stock closed up 5.43% at INR 372.85, which is quite a bullish close. But more importantly, the stock also surpassed the previous peak of INR 371 (the first time after a long stretch), giving it a deeper bullish tone.

Volume-wise, Friday’s volume was 1.17 million shares, which is more than 350% higher than the 10-day average volume of 258,000 shares (recorded the previous day). Volume and price action indicate a reversal from here. However, if the stock falls below INR 340, especially at the close, the current reversal signal would be cancelled.