Technical Check: Range breakout in Sumitomo Chemical could push the stock to fresh 52-week highs

Sumitomo Chemical Ltd rose by over 30 per cent in a year compared to nearly 17 per cent upside seen in the Nifty50, and over 21 percent gain seen in the S&P BSE 500 index.

The agrochemical company with a market capitalization of more than Rs 20,000 cr hit a 52-week high of Rs 459 on the BSE on 5 August 2021, and since then the stock has been trading sideways.

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After hitting a high of Rs 459, the stock took support near Rs 340 levels on daily charts and then bounced back. It retested the crucial support at Rs 340 twice – once in November, and then again in December 2021.

On the weekly charts, the stock seems to be trading in a range from October till January end. It finally broke out of the narrow range (340-400) in the last week of January 2022.

Experts are of the view that the technical parameters suggest that the momentum is likely to continue, and it could take the Sumitomo to a fresh 52-week high above Rs 600 in the next 6 months.

From a shareholding perspective, both foreign investors and mutual funds raised their stake in the December quarter. Foreign investors increased their holding from 1.32 per cent in September quarter to 1.36 per cent in the December quarter, data from Trendlyne showed.

Mutual Funds also increased their holding from 1.84 per cent in the September quarter to 1.92 per cent in the December quarter.

The stock price started its upward move from 152.5 (March 2020). It made a high of 338 in January 2021 eventually witnessing a sideways movement and took support at 258 levels and faced some resistance at 340 levels.

“The uptrend continued, and the stock made a high of 458 in July 21. A corrective fall followed making a low of 345 in December 2021. The super trend indicator is continuously in positive mode from March 2020,” Bharat Gala, President - Technical Research, Ventura Securities Ltd, said.

“Recently, the stock gave a range breakout and made a high of 420 accompanied by strong volumes. The Aroon Up/Down, MACD & KST suggest a possible firm uptrend. The possible targets are 625,” he added.

Aroon Oscillator is a trend following indicator used to measure the strength of the current trend. A value above Zero on the oscillator suggests uptrend in the underlying which could be a stock or an index.
 
“If the stock price corrects downwards the buy levels are (402-391)-382-(374-369). A stop loss to be observed in the trade is 358,” recommends Gala.

(Disclaimer: The views/suggestions/advice expressed here in this article are solely by investment experts. Zee Business suggests its readers to consult with their investment advisers before making any financial decision.)