The index ended the session on a negative note, despite opening in the green. The continued selling pressure that has been going on since the US Fed’s rate hike on 21 September 2022 isn’t decreasing as the Nifty 50 also broke its yesterday’s low.
Still, investors could find good long opportunities in some corners where a buying interest still persists. One stock that had rallied beautifully in the first week of September 2022 and now looking to continue its uptrend is Skipper Ltd (NS:). The company has a market capitalization of INR 725 crores and manufacturer of products for downstream industries.
Image Description: Daily chart of Skipper with volume bars at the bottom
Image Source: Investing.com
In the first week of September, the stock showed a stellar rally giving investors a quick return on their investment. After this rally, the stock turned its direction and started to trade sideways for the next couple of weeks. This is normal behavior for a stock as, after a sharp rally, investors take some time to digest this new-found equilibrium price hence, the stock kind of rests for a while. This consolidation phase depicts a tug of war between the bulls and bears as both the forces of demand and supply are exerted.
The longer this phase, the stronger the move is expected to come once the stock moves out of this range from either direction. The prior rally combined with his consolidation phase represents a bullish flag pattern which is a continuation pattern and depicts a resumption of the prior rally. As today the stock broke above this range on the upside, the continuation of the uptrend resumes from here.
The volume on any breakout day is very important and estimates the reliability of the breakout. In the case of Skipper shares, the noted volume for the day was 916.8K shares which is not very high but still seems a decent expansion as its 280% over the 10-day average volume of 239K shares.
Although the stock clearly surged past the resistance of INR 75, rallying over 9% to the day’s high of INR 77.35 but fell below it by the closing. Therefore, a closing above this level should be keenly watched before the last confirmation of the trend continuation. The estimated level to which the stock could travel upon a breakout is equal to the distance it traveled before entering this range.
Skipper shares depicted a rally of INR 18, hence they could rally further to around INR 90 – 95 in the near future, above INR 75. The current closing price is INR 74.25, giving the stock a decent upside potential of around 25% from the CMP. If the stock falls below the lower end of the range, i.e. INR 67, then the pattern would be negated.