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Stock Jumps 20% This Week, Delivers a Triangle Breakout

Published 11-06-2024, 12:01 pm

Small-cap counters seem to be turning out to be investors’ favourite pocket this week. The Nifty Small-cap 100 index is already up 2.27% this week, scaling to a new all-time high of 17,615, by 11:45 AM IST.

One counter from this space is making quite some noise and that is Donear Industries. It primarily engages in the manufacturing of fabrics under the Donear brand name, and trading of garments under the Dcot brand name in India, having a market capitalization of INR 542 crore. One of the interesting facts about promotors is they hold a 74.5% stake in the company which is almost the maximum limit of 75%, SEBI has allowed for any promotor.

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To go for the initial screening, we prefer to check the financial health score of the counter in InvestingPro to make sure the fundamentals are not bad. Any rating of 3 or above out of 5 is acceptable and obviously the higher the rating the better the fundamentals. In this case, a rating of 4 out of 5 makes it quite a good bet for further analysis.

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Now, on the technical front, the stock has delivered a big Ascending triangle breakout on the weekly time frame. This is a volatility contraction pattern and is known to propel the stock in the direction of the breakout. The pattern has been forming for quite some time (since early 2023) which makes this breakout quite important.

As the stock surged above the resistance of the triangle (INR 120), the breakout is expected to further push the stock to new highs. The move was backed by a huge volume of 4.19 million shares. This might not seem much but this weekly volume so far is already 630% higher than the 10-week average of 574K shares, and there are still 3.5 sessions left.

Long holders can look for a level of INR 165 which could be there on the screen in the near future. This gives an upside potential of 30% from the CMP of 127.

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