Markets
Technical Indicators Suggest Momentum for FMCG Stocks. Key Levels to Watch…
Summary
- New year has brought new hope for FMCG companies. What do technical charts point at?
Investors and traders alike were surprised by the sharp rally in one of the best FMCG stocks.
In 2022, ITC became investors’ favourite stock as multiple tailwinds came in favor.
Earlier, there were memes on ITC as the stock didn’t move from 2013 to 2021.
But the ~60% gains registered in 2022 changed the sentiment for the company and the entire FMCG sector.
With a weightage of 21% by ITC in the FMCG index and 31% by Hindustan Unilever (HUL), FMCG stocks are once again gaining bullish momentum after consolidating in the range for the last three weeks.
What’s more, at a time when FIIs have once again started selling Indian shares, defensive stocks such as FMCG are overlooked.
According to data available on NSDL, after pharma stocks, FMCG stocks saw the biggest inflows of ₹165.7 billion in the first three quarters of the current fiscal.
It seems 2023 has brought a new hope for FMCG companies…
Coming to technicals, the index has broken out of the bullish pattern.
On a 4hours or 240mins chart of the Nifty FMCG Index, the bullish dragon harmonic pattern is visible with the breakout at 44,450.
The bullish dragon harmonic pattern is the reversal pattern calculated using multiple Fibonacci retracements.
In the chart, the hump (point C) is a 50% Fibonacci retracement from the high of the head (point A) to the low of the left leg (point B).
While the right leg (point D) is nearly 88.60% Fibonacci retracement from the low of the left leg (point B) to the high of the hump (point C).
The trendline is connected from the head to the hump to mark the breakout at the tail (point E) which is placed at 44,450.
The breakout from the tail confirms the reversal on the chart.
Additionally, the pattern is formed at the medium-term moving average of 200EMA (orange) and the break above the 50EMA (green). This is like icing on the cake for FMCG bulls.
The target as per the pattern is 88.60% Fibonacci retracement of the head to leg (point A to B) which is around 46,000 level.
The pattern would negate on a break of 43,600. Index is currently trading at 44,700 levels.
Disclaimer:This article is for information purposes only. It is not a stock recommendation and should not be treated as such.
This article is syndicated from Equitymaster.com
