F&O Stock Delivers ‘Range Breakout’; Futures Traders Ready to Buy!

Going against the broader market sentiments, the share price of Pidilite Industries Limited (NS: PIDI ) cheered investors with its green closing. The stock jumped 0.96% to INR 2,372.4 on Monday as it outperformed the Nifty 50 index’s 0.65% fall to 16,988.4. This gain might not seem much however, it is the range breakout that is catching investors’ attention on the street.

Talking about the company, it is an INR 1,19,304 crores big manufacturer of adhesives and glues, including rubber-based glues and adhesives, and trades at a TTM P/E ratio of 95.86, which is a bit on the higher side. The stock is in the portfolios of biggies as well, as FIIs hold an 11.08% stake in the company while mutual funds have a 4.08% stake, as of December 2022.

Image Description: Daily chart of Pidilite Industries with volume bars at the bottom

Image Source: Investing.com

Now coming to the price action, the stock had been consolidating from the last week of January 2023. Its sideways movement was a clear indication of a stiff battle between bulls and bears which kept it going nowhere for around 2 months. This consolidation phase had a range of INR 2,355 on the upside (resistance) and INR 2,250 on the downside (support). There was an attempt to break above this resistance earlier this month which eventually led to a reversion on account of the high supply from this hurdle.

However, today the stock closed the session above the resistance which qualifies for a range breakout. The formation of this range, after a noticeable downtrend, is further strengthening the view of a bullish move from here. The nearest hurdle which is visible on the daily chart is INR 2,460, which could be used as a target level for long positions.

However, as per the dimensions of the range, the stock also has the potential to rally to around the same INR 2,460 mark. This confluence is making this level highly achievable in the near term. As the markets are quite volatile these days due to turmoil in the global banking system, traders should keep a strict stop loss, especially in a derivatives position, or else go with a hedged position.

Ideally, the support of INR 2,250 can be used to exit in case of a U-turn, in the spot market. This level might become too deep for a derivatives position therefore either a hedge position is recommended or a stop loss below INR 2,320 can be placed.

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