The Indian equities have been quite jittery over the past couple of weeks. Broadly speaking, the headline index NIFTY50 ($NIFTY) has seen itself oscillating between 50-DMA and 200-DMA during February. These DMAs are placed at 17885 and 17302 respectively. Lately, the index has made strong attempts to hold the 200-DMA as a support on a closing basis. Despite some intermittent violations of this important level, it is crucial that NIFTY holds this support on a closing basis.
Meanwhile, this Indian engineering multinational which is providing sustainable solutions in the areas of energy and the environment is showing a strong technical setup and hints at a likely upward revision of price over the coming days.
From the lows that were formed near 700 levels in the last quarter of 2020, THERMAX had a great run; the rally that followed saw the stock returning over 286% from those levels. It marked its high at 2607 in September last year. The recent price action shows that the stock may be in for some resumption of the up-move again.
After the stock peaked just above the 2600 level in September, the stock witnessed a corrective downtrend. The retracement that followed saw the stock slipping below its 200-DMA. After struggling to keep its head above this point, the stock did see some recovery. However, this recovery halted at 2400 where the stock formed its lower top. The stock has grossly underperformed the broader markets after that, it stayed under corrective decline and has made a strong attempt to form a base near 1830 levels.
The most recent price action shows the stock trying to stage a reversal after putting a potential bottom in place between 1830 and 2000 levels. It has also crossed above the 50-DMA and 200-DMA; they currently stand at 2000 and 2107 respectively.
The stock is seen consolidating just below the 2160 level; any convincing move above this point is likely to see a meaningful appreciation in the price.
The RSI is neutral and does not show any divergence against the price. The weekly RSI is seen breaking out from a formation and moving higher. The MACD is above the signal line and stays in continuing buy mode. The RS line against the broader NIFTY500 index is seen moving higher on both daily and weekly timeframes; it has also crossed above its 50-period MA.
Importantly, while the stock consolidates below the resistance point of 2160, the On-Balance Volume (OBV) has already surpassed its previous most immediate high point. This confirms the participation of volumes in the move and also hints at accumulation in the stock at current levels.
If the resolution of this technical setup occurs on the expected lines, the stock may go on to test 2350–2375 levels over the coming days. This would translate into potential returns of ~9.50% from the current levels. Any close below 2000 would negate this technical setup and view.
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Milan Vaishnav, CMT, MSTA is a capital market professional with experience spanning close to two decades. His area of expertise includes consulting in Portfolio/Funds Management and Advisory Services. Milan is the founder of ChartWizard FZE (UAE) and Gemstone Equity Research & Advisory Services. As a Consulting Technical Research Analyst and with his experience in the Indian Capital Markets of over 15 years, he has been delivering premium India-focused Independent Technical Research to the Clients. He presently contributes on a daily basis to ET Markets and The Economic Times of India. He also authors one of the India’s most accurate “Daily / Weekly Market Outlook” — A Daily / Weekly Newsletter, currently in its 18th year of publication.