Chart Check: A breakout above 50-SMA on weekly charts makes this specialty chemical stock an attractive buy

Short-term traders can look to accumulate the stock on dips towards Rs 2,450 as it is already trading near overbought levels which could lead to some profit-taking at higher levels.

The relative strength index (RSI) is at 69.5. RSI below 30 is considered oversold and above 70 is considered overbought, Trendlyne data showed. MACD is above its center and signal line, this is a bullish indicator.

The specialty chemical stock hit a record high of Rs 2,916 on 15th September 2022 but it failed to hold on to the momentum. The stock consolidated above Rs 2,200 levels in January and February 2023 before heading higher.

The recent momentum in the stock price helped the stock to climb and close above the 50-SMA on the weekly charts last week, which has opened room for the stock to head higher.

In terms of price action, the stock is trading well above most of the crucial short- and long-term moving averages of 5,10,30,50,100 and 200-DMA on the daily charts, which is a positive sign for the bulls.

ET CONTRIBUTORS

Nifty rose above 18,000 levels and the chemical sector started to pick up the movement. Among the chemical stocks, Pidilite Industries has given a bullish breakout on the weekly charts.

“On a higher time frame, Pidilite Industries stock is under structural bullish trend. The stock has tested the positional moving average (orange line) after 23% correction from the top. The mentioned moving average has acted as a trend navigator in the past,” says Kapil Shah, Technical Analyst, Emkay Global Financial Services and Trainer at FinLearn Academy.

“In recent context, the stock has formed a long base at the key moving average which coincides with the price action support level. After forming the base, the stock has given the breakout on the higher side,” he said.

“It indicates termination, decline and resumption of the bullish trend. Stock is sailing above all the moving average across all the time frame, it represents positive momentum in the stock,” highlighted Shah.

Data suggests that the momentum oscillator RSI is also reverting from the oversold zone. It shows a high discount on the stock.

“Based on the aforementioned rationale, stock can be accumulated in the range of Rs 2,472 to 2,450 with a stop loss of Rs 2,400 level. Stock can have upside movement up to Rs 2,600 level. Duration of trade can be up to 2 months,” recommends Shah.

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