The broader market sentiments remain volatile as zig-zag moves in the index continue to trouble short-term traders. However, there are much smoother and more stable price action patterns being witnessed in individual counters, especially midcaps. Investors in these counters are not facing much volatility and are relatively having a calmer time.
One stock that is making a comeback from the bottom after a consistent beating is Sterling and Wilson Renewable Energy (NS:) which is a INR 5,719 crores end-to-end solar engineering, procurement, and construction (EPC) solutions provider. The stock trades at a P/E ratio of -6.29, compared to the sector’s average of 53.79.
Image Description: Daily chart of Sterling and Wilson Renewable Energy with RSI at the bottom
Image Source: Investing.com
The share price of SWSOLAR surged 1.6% in today’s red session to the last traded price of INR 306, by 10:37 AM IST. The stock had consistently been trending down since it marked its peak of INR 509.1 in October 2021 as investors kept on liquidating their holdings on every rally. However, there has been a decent consolidation phase that the stock had been going through for the last couple of months which is the first sign of abating supply of the stock. Generally, before a trend reversal, a stock goes through a sideways trend (consolidation phase) which is actually a healthy sign of a gradual trend reversal and much more sustainable over very sharp reversals.
The stock is yet to fully come out of this range, but it has already cleared a falling trendline resistance which is a positive sign. As can be seen from the chart above, the stock comfortably surged past its 3-month long trendline resistance a few sessions back which further increases the probability of a rise above this range.
All this price action is also getting the support of a clear bullish divergence around the 52-week low of the stock. This divergence indicates a slowing downward momentum and a potential reversal on the upside. In fact, it is one of the most reliable indicators of a potential trend reversal.
All these factors combined are painting a bullish picture for SW Solar and it might soon start to rally on the upside. The nearest level which might be a piece of cake to travel to is INR 318 – INR 320. This is the resistance level of the consolidation phase. The real up move is expected to start above this level, which could easily take the stock to INR 340 and then to INR 380 in the near future. On the downside, a decisive close below INR 275 would negate the up move.
