Small-Cap Showing ‘Bottom Reversal’ Amid Bullish Divergence!
While many stocks are flying high in the small-cap space, all thanks to a renewed buying interest, there are also a few counters that couldn’t impress investors earlier but are now coming back on track.
One such stock is Affle India Ltd (NS: AFFL ) which is a small-cap advertising company with a market capitalization of INR 12,317 crores. Recently, the company announced its FY23 earnings, reporting a 29% YoY growth in revenue to INR 1,488.28 crores and consequently net income surged 14.35% YoY to INR 244.59 crores.
The company plans to acquire YouAppi, a global gaming-focused programmatic mobile app marketing platform that has a strong ground presence with teams based out of USA, Israel and Japan. YouAppi’s revenue has grown 2x, from $16.01 million in FY20 to $32.83 million in FY22 and this acquisition could become a growth factor in Affle’s business down the line.
Image Description: Daily chart of Affle (India) with the RSI at the bottom
Image Source: Investing.com
Now, coming to the technical setup, the stock faced severe liquidation from investors’ portfolios as it tanked around 37% from its all-time high of INR 1,511, marked in January last year. The fall from the last many sessions had taken the shape of a falling channel pattern. This is a bearish signal that keeps the prices between two parallel downward-sloping trendlines.
However, a break above the upper trendline of this pattern also indicates a reversal, which is exactly what is happening with Affle (India). Today, the stock closed 1.88% up at INR 942.3, which is the first closing above the upper trendline, indicating the current downtrend might be in the last leg.
Also, prior to this channel break, the stock had been rising after making a bullish divergence on the daily chart. This is a very prominent reversal signal and generally gives an early warning of a transition from a downtrend toward an uptrend. Both these signals (bullish divergence + falling channel breakout) are hinting toward a decent upside potential for the stock.
On the charts, if the stock crosses the previous swing high of INR 955, then the price structure will change to a higher high and higher low (HH &HL) and then traders can look for the nearest target of INR 1,020 and then to INR 1,050.
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