Finolex Cables was back in demand on February 23 as the stock has decisively broken the last five-day consolidation range, which could be termed as a Flag pattern breakout, and climbed above the high of February 15 when it formed the biggest bullish candlestick pattern on the daily charts.
The stock rallied 6.7 percent on Thursday to Rs 706 on the NSE, the highest trading level since April 26, 2018, at the time of writing this article. It has formed a long bullish candle on the daily charts and traded above the levels hit on February 15.
It touched an intraday high of Rs 714.50 and moved above all key moving averages including the short-term as well as long-term moving averages, with significantly higher volumes. From the previous week, the stock has gained more than 25 percent.
The stock has also broken its downward-sloping resistance trendline, adjoining highs of February 15, 2018 (record high of Rs 757.90) and February 15 this year.
Momentum indicator RSI (relative strength index) at 75 also indicated a positive trend. However, it seems to be in a little bit of overbought territory now with bearish divergence as the price makes a higher high and indicator (RSI) forms a lower high.
"The counter is in a classic bullish momentum and witnessed a breakout of a Flag pattern formation on the daily chart after 5 days of short consolidation with high volume. On a longer timeframe, it has also seen a breakout of an ascending triangle formation with higher highs and lower lows. The overall structure of the counter is very lucrative, as it is trading above all important moving averages," Pravesh Gour, Senior Research Analyst at Swastika Investmart, said.
On the upside, the levels of Rs 750 operate as susceptible levels; above these, "we can anticipate a protracted move towards Rs 770+ in the shorter to longer term," Gour said. On the downside, Rs 643 acts as a crucial support during any pullback, the analyst added.
The momentum indicator MACD (moving average convergence divergence) is sustaining the current strength, and the RSI (relative strength index) is also poised favourably, the expert said.
Vidnyan Sawant, AVP - Technical Research at GEPL Capital said Finolex Cables was currently nearing record highs, which tells that the stock is already in a strong momentum.
The stock in the prior week broke out of a Cup & Handle pattern, signalling a continuation of the prior uptrend. The breakout is confirmed as it is accompanied by higher volumes, he believes.
The prices are continuously hovering near the upper Bollinger band which points towards the rising volatility of the prices.
"RSI on the weekly timeframe has exhibited a breakout which reflects the strong presence of momentum. Going ahead, we expect the prices to move higher till the level of Rs 780 where the stop-loss must be Rs 660 on the closing basis," Vidnyan said.
On the Earnings
The Pune-based electrical and telecommunication cables manufacturer Finolex Cables has recorded 8 percent year-on-year growth in consolidated profit at Rs 154.3 crore for the quarter ended December FY23, driven by healthy topline and operating performance.
Consolidated revenue for the quarter grew by 18.2 percent to Rs 1,150 crore compared to the year-ago period, with growth across segments including electrical cables, communication cables and copper rods.
"In volume terms, electrical wires increased by 24 percent, while within the communication cables segment, the volume of metal-based products improved by 40 percent during the quarter and optic fiber cable volumes grew by over 100 percent during the quarter," Finolex Cables said in its filing to exchanges on February 9 this year.
Volume growth in new products within the appliance/FMEG sector was flat and generally affected by inflationary pressures as well as subdued consumer sentiment, the company said.
On the operating front, EBITDA (earnings before interest, tax, depreciation and amortisation) grew by 23 percent YoY to Rs 146 crore for the December FY23 quarter, with a margin expansion of 50 bps at 12.68 percent.
Disclaimer: The views and investment tips expressed by investment experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.
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