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The index ended Friday on a negative note, falling 0.17% to 9221.8, marking its 6th consecutive session of loss. However, going against the grain, one small-cap firmly held its ground in today’s session and is gearing up to deliver a good breakout. The company is Gujarat Narmada Valley Fert.Co.Ltd (NS:) or GNFC which is an INR 8,297 crores big fertilizer manufacturing company.
The company reported a 13.26% QoQ jump in Q3 FY23 revenue to INR 2,750 crores while net income slid 39.89% to INR 324 crores, translating into a profit margin of 11.78%, which almost halved from a year ago. But the bad numbers are already discounted in the price as the stock is down 9.8% in the last one month.
Image Description: Daily chart of Gujarat Narmada Valley Fertilizers & Chemicals with volume bars at the bottom
Image Source: Investing.com
Looking at the recent price action, investors are showing their inclination toward GNFC shares as a result of which its price surged 5.19% to INR 551.7 on Friday, closing near the day’s high of INR 554.95. On the daily chart, there is a falling trendline resistance just above today’s high which is what makes this stock a perfect candidate to be on the watchlist of bulls.
If tomorrow the stock manages to break above INR 560, it would attract a whole new wave of traders which could take the stock to INR 600 odd levels. Even before breaching the trendline resistance, the stock garnered a volume of 2.37 million shares today, which is 253% higher than the 10-day average volume of 671K shares. This is a healthy sign but still, a high volume has to be there on the breakout day for a reliable impending rally.
The medium-term trend of the stock is still negative as portrayed by the formation of a series of lower highs through which the falling trendline has been created. Therefore, going long on this counter before the breakout might be too risky.
On the downside, the stock had taken multiple support around the demand zone of INR 520 – INR 515. As long as it is hovering above this zone, long holders need not panic.
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