Chart Check: Breakout from Rectangle pattern makes DCM Shriram Industries an attractive buy

DCM Shriram Industries Ltd, part of the sugar industry, has rallied over 30% which helped the stock to break out from a rectangle pattern on the weekly charts which will help the stock to hit fresh record highs.

Short-term traders can look to buy the stock on dips for a possible target of Rs 195 in the next 1-2 months, suggest experts.

DCM Shriram Industries which is also part of the S&P BSE Smallcap index hit a fresh record high of Rs 170 on 28th November 2023.

The stock rose from Rs 120 as on 23rd October 2023 to Rs 164 recorded on 24th November 2023 which translates into an upside of over 30% in a month. It rose more than 13% in a week and has doubled in the last 6 months.

The momentum helped the stock to break out from a consolidation range since July 2023 where 150-156 acted as a stiff resistance while on the downside levels above 110 acted as a strong support on the weekly charts.

The stock closed at Rs 165 for the week ended November 24.

In terms of price action, the smallcap stock is trading above most of the crucial short- and long-term moving averages such as 5,10,30,50,100 and 200-DMA on the daily charts which is a positive sign for the bulls.The daily Relative Strength Index (RSI) is at 76. RSI above 70 is considered overbought. This implies that the stock may show a pullback. The daily MACD is above its center and signal Line, this is a bullish indicator.

DCM Shriram Industries stock is currently surging to unprecedented heights, signaling a substantial departure from its previous support levels of around 122.

“The shift in price dynamics at the 122 mark indicates a noteworthy positive momentum in the stock. The breakout from the Rectangle pattern suggests the initiation of an upward trend,” Omkar Patil, Technical Research Associate at GEPL Capital, said.

“This bullish signal is strengthened by the stock consistently maintaining a position above the 12-week Exponential Moving Average (EMA), emphasizing its steady upward trajectory,” he said.

“Additionally, a bullish perspective is supported by the Relative Strength Index (RSI) on the weekly chart, showcasing a notable range-shift,” highlights Patil.

“Going ahead, we expect the prices to move higher till 195 level where the stop loss must be 155 strictly on the closing basis,” he recommends.

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(Disclaimer: Recommendations, suggestions, views, and opinions given by experts are their own. These do not represent the views of the Economic Times)