HSIL forms bullish candle; upside looks limited

India’s largest sanitaryware manufacturer, HSIL Ltd has marked the low of Rs 32.70 as of March 25, 2020. Thereafter, it marked the sequence of higher tops & higher bottoms. The stock has gained nearly 340 per cent from the low of Rs 32.70.  

Considering the daily timeframe, the stock is trading in the rising channel since the last 59 trading sessions. On January 18, 2021, the stock has taken support exactly from the edge of the upward sloping trendline of the rising channel. Thereafter, it has bounced nearly 28 per cent in the next five trading sessions.   

Currently, the stock has reached near the resistance zone of Rs 147-Rs 148, which is defined by the upper trendline resistance of the rising channel. The momentum indicators i.e. RSI and stochastic are also in the overbought region.   

Interestingly, the price has made three higher highs in recent times but most of the indicators, including the RSI, have not reached near their prior highs. Moreover, a negative divergence was also spotted at the daily and the weekly timeframe on the stochastic oscillator, which indicates a limited upside. A negative divergence occurs when the price is making a higher high, while the RSI forms the lower high.  

Going ahead, the zone of Rs 147-Rs 148 is crucial for the bulls to continue the rally as the upper trendline resistance for the rising channel is placed in this zone. If it is unable to surpass this level, then there are chances of entering into a corrective to sideways phase, where the 5-day EMA is likely to act as a support level. The 5-day EMA is currently placed at Rs 131.80 level. In case, the stock sustains below the 5-day EMA level, then it may witness some profit booking.