Hello Readers!
Today we will discuss your evening tea ka sathi– Britannia!
Ticker: BRITANNIA
CMP- Rs. 5625
Support 1- Rs. 5580, Support 2- Rs.5300
Resistance 1- Rs. 5910, Resistance 2- Rs.6175
Refer to the chart below. We can see that Britannia has trended upwards pretty consistently, and the corrections, which might have seemed scary in the past, seem trivial in hind-sight.
It is one of those rare buy & hold stocks that grandparents bought and forgot and made their future generations very wealthy!
However, despite the amazing track record, even a stock as mind blowing as Britannia has not been spared the market correction that has stunned the Indian Capital Market due to a plethora of reasons.
Britannia is currently 20% off from its highest price of Rs. 6934 and that is a lot of correction for a quality stock like Britannia which has grown at a 10 yr CAGR of 35%!
So what\’s next?
I looked at the hourly chart and this is what I found :
The hourly chart of Britannia is showing a mild positive divergence between the RSI and price. This indicates that the momentum of correction is going to slow down. It may resort of consolidation before it resumes the uptrend. I am not betting on a very deep correction as the daily chart continues to remain quite healthy and the correction started off without a major negative divergence like in the case of Maruti\’s chart, which is also a star performer like Britannia but is in the deep red zone and has breached its 52-week low and its correction started of with a sever RSI negative divergence.
I will look at the resistance level of 6175 because it presents the previous high, breaching which would be a continuation of the uptrend for me. But before that happens, I believe the stock will consolidate like it has done in the past following major corrections like this one.
The above chart shows the range shift activity of RSI, which has almost always given an early indication of the price behaviour. RSI has shifted it\’s range to correspond with the trend of price. Like in the uptrend, it maintained a range of 40-80 whereas in a downtrend/consolidation phase, it maintained a range of 20-60.
Such a tell tale behaviour of RSI is astounding even though it happens across stocks and indices, it still leaves me in awe of this wonderful indicator.
This phenomenon has been highlighted better in the chart below, wherein the uptrends in price have been shaded in green and the downtrend/consolidations have been shaded in red. We can clearly make out how the RSI accurately reflects the subdued momentum in price movements during cool periods and flares up when it starts trending again. RSI is rightly called a leading indicator.
As we see in the right most corner of the above chart, the RSI has recently shifted to the bear zone and this further strengthens my analysis that Britannia will continue to consolidate at this point. However, a move accompanied with heavy volumes below the support zone of 5380-5300 will be indication of continued correction, though I do not expect it to happen, but we have to keep an open mind and be ready for the unexpected.
If you would like to discuss any aspect of this analysis of Britannia, please feel free to reach out to me at kchamaria1993@gmail.com.
This is all for today! Do share this analysis with other stock market enthusiasts like you and me!
Adios!
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