Momentum Play: Stock Soars to 3-Month High But ‘Just Getting Started’!

While the broader markets are trading more or less in a range, some stocks are making a killing for investors while others are decently raking up good gains. The cement space has been on investors’ radar for the last many sessions with stocks such as India Cements (NS: ICMN ) having delivered a return of over 22% in the last one month. 

One stock that is yet to give a move is a small-cap cement manufacturer, Birla Corporation Ltd (NS: BRLC ), having a market capitalization of INR 7,739 crores. The product portfolio of the company ranges from cement to jute goods, polyvinyl chloride (PVC) floor covering, as well as auto trims, and steel castings. Although the company clocked a 9.8% YoY jump in net revenue to INR 7,560 crores, the net income tanked 36.75% to INR 3,98.59 crores in the same period. Still, the company is trading at a relatively lower valuation, with a P/E ratio of 19.42, compared to peers such as UltraTech Cement (NS: ULTC ), Ambuja Cements Ltd. (NS: ABUJ ), and Shree Cement (NS: SHCM ) which are commanding a P/E of 25.61, 29.85, and 32.95, respectively.

Image Description: Daily chart of Birla Corporation with volume bars at the bottom

Image Source: Investing.com

The daily chart of Birla Corporation seems quite lucrative for the short term. After recovering decently well from the bottom marked in June 2022, the stock had been consolidating in a range for the last few sessions. The more or less sideways trend is clearly evident on the chart. This range resulted in a formation of an ascending triangle chart pattern in which the resistance remained around 1,015 - 1,020, while the lower support kept on increasing and formed a rising trendline. The stock has taken support from this rising trendline multiple times in the last few sessions.

Today, as the market was more or less trading in a range, the stock surged past its upper resistance level. The high for the day so far has been INR 1,049, which is the highest in over 3 months. Although there is some selling pressure being witnessed from the top, with the stock still trading 2% up at INR 1,025 (by 2:48 PM IST) it is still trading above the breakout level. If we see a closing above INR 1,020, the breakout would be confirmed. The volume for the was recorded at 199.6K shares which is not very high and therefore the breakout is a bit skeptical as of now. However, as long as the stock is trading above the rising trendline support of INR 970, the trend should be deemed to be positive.