To The Moon

Deepak Nitrite: Charts Indicate Outperformance?

We have been “spot on” in discussing the ongoing correction for the last two weeks, and it seems to be turning out well. As the correction has begun, I certainly prefer to take up shorts from a short to mid-term perspective. But this is the perfect time to focus on those counters which are trending in nature to make good long-term bets. One such counter is Deepak Nitrite. Let’s see all the observations I have spotted on the same.

Weekly: Price action

It’s been an awesome decade for the investors of the counter, where the counter has just perfectly made higher tops and bottoms and moved well within the channel. This continuation is seen even in the present time, the last two weeks being channel breakout. A bright possibility of trend continuation (as we saw in the past during every channel breakout), one can consider this to be the mid to short-term trade, based on the price action on a higher timeframe.

Weekly: Fibonacci

The previous rally was decently a furious one from the low of 2020 till the top during September 2021. The rally saw a natural counter-reaction, and this correction halted right onto 50% of retracement. Channel breakout (as discussed in the previous chart) after the retracement of 50% is making it a more attractive bet.

Weekly: RSI

RSI is a momentum indicator. After a steady rise of RSI from 2018–2019 till September 2021, it started declining and took decent support near oversold trajectory (30) and again started its upward momentum. Alongside RSI, even the moving average is plotted, which helps generate trades. The crossover confirms the emergence of a new uptrend and better times ahead for the counter.

Weekly: MACD

MACD is a lagging indicator and confirms the trend of emergence and continuation. For many years, MACD clearly remained above the zero line and continued its up rally. After the recent correction, the MACD fell below the zero line. Recently, two positive signals were generated by MACD, the first being MACD crossover and the second being the crossing of the zero line. The newly emerged trend is likely to continue.

Weekly: Ichimoku

One of the bests, Ichimoku, is a trend-following indicator, highlighting the past, present and future. So far, Ichimoku is not completely supporting bullishness on the counter but certainly turning bullish in phases. A couple of interesting observations here are in discussion.

Tenkan — Kijun crossover is confirmed present week, which confirms the possibility of a short-term bullish trend. The future Cloud is turning narrow with Sanko Span A turning towards Span B. The price made a high right onto the Cloud itself, where Kumo cloud is acting as resistance. The breakout above the recent high can be a decent sign of trend reversal.

Weekly: Bollinger Bands

Bollinger bands can be used for trading as well as investments. The price generally remains within the band, as bands offer support and resistance. Whenever the price is plotted above the band, that is considered a sign of the emergence of a new trend. The present week closing was above the band, making it a perfect bullish trade. Certainly, follow-up buying would confirm the further strength.

Daily: Price action

The daily chart shows a prolonged downtrend, making lower tops and lower bottoms. Near the recent bottoms, higher volumes were seen with bullish candles, confirming the bright possibility of accumulation. The counter also started making higher tops and higher bottoms from the recent lows and broke above the resistance trendline with volumes. Worth considering counter even from a short-term perspective!

Daily: Ichimoku

The price is clearly above Kumo Cloud, with thick future cloud, Tenkan Kijun crossover and Chikou span well above price, making it a perfect trending counter in the near term.

Ratio chart: Deepak Nitrite and Nifty 500

On the daily timeframe, though the counter underperformed for a year, the price action looks like a falling wedge, with the breakout seen in recent times with the follow-up. There is a bright possibility of outperformance of the counter over Nifty 500 in the time to come.

Putting it all together

The weekly price action with channel breakout with a Fibonacci retracement of 50%, trending momentum RSI, a crossover of MACD and crossover of MACD above zero line, price plotting above a higher band of Bollinger band, positive Tenkan — Kijun crossover making the counter a perfect stock to trade from short-term, mid-term as well as a long-term perspective. Further, the daily chart resistance trendline breakout with decent volumes, higher tops, higher bottoms, and trend confirmation by Ichimoku with all positive signs suggest the same. The ratio chart of Deepak Nitrite with Nifty 500 also supports the likely outperformance of the counter over Nifty 500.

Statutory Disclosure: Kindly note that this update is only for educational purposes. It is safe to assume that my personal position, my fund’s position, my client’s position and my relative’s position may be open on the counter. Prefer to take the advice of your financial advisor before initiating any position.

This article was originally published on Blog by Tickertape on 26th September 2022.