Time to Get Cautious Amid a ‘Major Breakdown’ in this Stock!

  • Stock Market Analysis
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The rally at the opening tick clearly couldn't sustain against the pessimistic market conditions. The Benchmark Nifty 50 index has lost all of its gains and currently trading 0.2% down at 16,824, by 2:02 PM IST. Although there are a few sectors that are still holding onto their opening gains, the broader sentiments are still weak and the rupee has also become flat after showing strength in the morning session.

In this weak market one stock that has given a fresh breakdown is Pidilite Industries Limited (NS: PIDI ). The company is in the business of manufacturing adhesives and glues, including rubber-based glues and adhesives and owns well-known brands such as Fevicol, Dr.Fixit, Fevikwik, M-Seal, etc. Investors have enjoyed a stellar rally in the stock from the June 2022 low of INR 1,988.55  to a high of INR 2,918.95 this month. The major gains of the rally came on the back of strong support from the broader markets, as this time period was also a good one for the Nifty 50 index.

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

Image Source: Investing.com

However, as the markets are in a correction mode, shares of Pidilite are also losing their strength. The stock tanked 3.31% to INR 2,678 in today’s session, underperforming the Nifty 50 index and still not looking to halt anytime soon. 

Prior to the plunge, the stock made a clear bearish divergence on the daily chart which indicated that the back-then current upward momentum might be fading. Today's breakdown has further confirmed a trend reversal from the highs which is a concerning sign for the bulls. The volume for the day so far has been recorded at over 537K shares, which is kind of average. This is an indication that we might see some retracement from here on the upside which is where more conservative short opportunities might arrive as very high participation at current levels is not there.

On the way back up, the stock could face stiff resistance around INR 2,800 which was the prior support for the stock and has now turned into resistance. On the downside, the continuation of this ongoing fall might throw the stock to the next support level of INR 2,600, which is a good demand zone. 

Today’s fall has also breached the rising trendline support which supported the stock many times on its way up in the last couple of months. This trendline has been breached for the first time after the stock started to rally hence, holds quite a high importance. A weekly close below this trendline would probably be the last reversal signal that bears would wait for.

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  • Jb chandan Chandan @Jb chandan Chandan
    Very timely& exhaustive  analysis
    Like 0

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