Technical Analysis

BSE FMCG Index at key resistance

Yoganand D. | Updated on November 15, 2017 Published on February 11, 2012

The BSE FMCG index registered its life-time high at 4,274 on November 14, 2011 and life-time low at 705 on April 24, 2003.



Though the BSE FMCG Index is made up of 11 scrips, it is ITC that dominates with a 53 per cent weight. Hindustan Unilever with a 20 per cent weight and Nestle with a 7.9 per cent weight take the next two positions, while Colgate Palmolive, Dabur India and United Spirits each have 3 per cent weights. Godrej Consumer, Tata Global, Marico, United Breweries and Jubilant FoodWorks are the other companies in the index. The BSE FMCG index registered its life-time high at 4,274 on November 14, 2011 and life time low at 705 on April 24, 2003.

Ever since the life-time low of 705, the index has been on a long-term structural bull run. The index resumed its long-term uptrend in February 2011 after finding support at around 3171.

Medium-term trend is also up for the index. Strong breakthrough of the resistance at 4,274 can push the index higher to 4,500 and to 4,800 levels in the long-term.

The index has key long-term supports at 3,800, 3,200 and 2,750 levels, which can cushion the index on declines.

Medium-term view

The index took support at 3,730 in September 2011 and continued its uptrend. Since then, it has been on a medium-term uptrend.

Within this uptrend, we notice formation of an ascending triangle pattern - a bullish continuation pattern — from last December.

The index is currently testing the top horizontal line of the ascending pattern at around 4,130. An emphatic break through of the top horizontal line will take the index higher to 4,274 and 4,300 range in the ensuing months.

A conclusive rally above this range will pave way for an up move to 4,400 and 4,500 in the medium-term. But, inability to surpass 4,274 can drag the index lower to 4,000 or 3,900.

This uptrend will be mitigated if the index slumps below 3,900. Next medium-term key supports are at 3,730 and 3,600. A brief technical view on the top three BSE FMCG index stocks is as follows.

ITC

ITC has been on a long-term uptrend from its 2008 trough of Rs 66.

However, after marking an all-time high at Rs 216 on October 2011, the stock started to move sideways in a broad range between Rs 190 and Rs 216.

Strong breakthrough on either direction will determine the medium-term trend for the stock. A strong upward break through of Rs 216 will take the stock higher to Rs 230-235 zone.

On the other hand, a decisive tumble below the lower boundary of Rs 190 will pull the stock down to Rs 190.

A further plunge below Rs 180 can drag the stock to Rs 168 in the medium term. Immediate support is pegged at Rs 197 and resistance at Rs 210.

Hindustan Unilever

In October 2011, Hindustan Unilever, emphatically broke through its resistance at Rs 350 and accelerated until it marked its all-time high at Rs 420 in December.

Thereafter, the stock began to lose its bullish momentum and started declining.

Strong breach of its immediate support at Rs 375 can pull the stock down to Rs 350 and to Rs 340 in the medium-term.

Next important support for the stock is at Rs 320. A jump above Rs 405 will lift the stock higher to Rs 420 in the short-term.

Nestle

Nestle has been on an intermediate-term sideways consolidation phase in the broad range between Rs 3,960 and Rs 4,500 since July 2011. Strong break through of the significant resistance level at Rs 4,500 will lift the stock higher to Rs 4,800 and Rs 4,900 in the long term.

Conversely, a tumble below Rs 3,960 can pull the stock down to Rs 3,780 and Rs 3,550 levels in the medium term. Short-term resistance is at Rs 4,320 and support is at Rs 4,080.

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