Chart Check: After over 50% rally in a month, should you book profits or buy this consumer electronic stock?

Synopsis

Dixon Technologies’ stock has surged 50% in a month on strong volumes, and experts believe the rally may continue. The momentum helped the stock climb above the 50- and 200-day moving averages on the daily charts. However, the Relative Strength Index (RSI) indicates that the stock is in the overbought zone. Short-term traders should look for opportunities to add the stock on declines for a potential target above INR6,000 ($81) in the next three months. Dixon’s stock is trading above the upper Bollinger Band, indicating a volatility and uptrend breakout. Volumes have also been above average since May.

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The stock price of Dixon Technologies, a consumer electronics company, rocketed 50% in a month on strong volumes, and going by the chart structure the rally may not be over yet, suggest experts.

The stock rose from Rs 2,912 as on 16th May 2023 to Rs 4,546 recorded on 16th June 2023 which translates into an upside of 56% in a month.

Short-term traders can look to add or accumulate the stock on declines for a possible target above Rs 6,000 in the next 3 months, suggest experts.

The stock hit a fresh 52-week high of Rs 4,722 as on 19th June 2023. The stock rose more than 14% in a week and over 60% in the last 3 months.

The momentum helped the stock to climb above the 50-DMA in May and 200-DMA in the month of June on the daily charts.

The momentum has pushed the stock toward the overbought zone; hence, some pullback could be on the cards.

The Relative Strength Index (RSI) is 86.7 on the daily charts. RSI above 80 is considered strongly overbought. This implies that the stock may show a pullback.

On the monthly chart, the RSI never dropped below 40, indicating that it never entered a bearish zone. The RSI breaking above the descending trendline adds another reason for the stock to reverse.

The month of May closed above 36-SMA, which represents the average of the previous 36 months, and June is also trading above the 36-SMA.

“If we consider the highest high of Rs 6,243 in the month of October 2021 and the lowest low of Rs 312 in the month of August 2019, Dixon Technologies stock has retraced to the golden ratio of 61.8% at Rs 2,553 in the month of January 2023, and the trend has since reversed. The RSI is above 60 levels on the weekly chart, indicating that momentum is strong,” Suraj Bathija, Founder & CSO at AlgoBulls, said.

ET CONTRIBUTORS

The stock is trading above its 52-week moving average. The 52-week moving average (SMA) indicates whether the stock is trading above or below its yearly average.

The stock is also trading above the upper Bollinger Band, indicating a volatility and uptrend breakout. From 15 May 2023 to the end of 9 June 2023, volumes were above average.

ET CONTRIBUTORS

“The RSI has been above 60 on the daily chart since the end of May 2023 and has remained in the overbought zone. Volumes on those days are above average on every green candle,” highlighted Bathija.

“Furthermore, volumes on green days have been higher than on red days for the majority of the time since February 2023. Traders can purchase it now with a target price of Rs 6,140 and Rs 7,640 in the ensuing months to a quarter,” he recommended.

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

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