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After a good start to Tuesday’s session, investors’ inclination toward the small-cap space is clearly evident. Chemcon Speciality Chemicals Ltd (NS:) is one counter that is gaining traction and looking to cheer investors with a high upside in the immediate future.
The company is in the business of manufacturing specialized chemicals, having a market capitalization of INR 999 crores. The stock had been falling consistently since its debut on the Indian bourses, taking a decent hit of over 60%, from the listing price of INR 731 to the CMP of INR 290. However, it seems like this long period of pain is getting over as the stock is attempting a trend reversal.
Image Description: Daily chart of Chemcon Speciality Chemicals with volume bars at the bottom
Image Source: Investing.com
Today, the share price of Chemcon Speciality Chemicals jumped over 6% to INR 290 and surged past the neckline resistance of an inverse Head & Shoulders chart pattern. There are many patterns that are known to reverse a prior downtrend towards an uptrend, but this one is amongst the most prominent ones.
The location of such patterns on the chart also matters and impacts the reliability of the reversal. The higher/lower the pattern forms amid an uptrend/downtrend, the more room the stock gets for the potential fall/rally. In the case of Chemcon Speciality Chemicals, this pattern has been formed around all-time lows. In fact, the head of this pattern (the deepest trough) is itself at an all-time low. These locations indicate the highly oversold status of the stock which further adds fuel to the reversal move.
The stock completed today’s breakout with a high volume. The NSE recorded a total figure of 315.1K shares, which is over 830% higher than the 10-day average volume of 33.6K shares. Any form of breakout backed by volume expansion is always a good sign of the strength behind the move.
As far as the upside levels are concerned, there is a gap being left on the daily chart, after a gap-down opening on 14 November 2022, the day when the stock closed 17% down. This gap is still there and it seems like the stock might now attempt to close it, which might lead it to rally to INR 370.
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