Range Breakout: Stock Soars 11% to Break ‘3-Year-Long’ Resistance!

Recently, the government of India announced a ban on the export of broken rice over an estimate of production hit on account of delayed planting and rainfall deficit. Apart from this, the government also imposed a 20% duty on the export of all other varieties of rice except basmati and parboiled. These curbs have jittered investors of the companies primarily dealing in the export of rice such as KRBL Ltd (NS:), LT Foods Ltd (NS:), etc.

However, today the share price of KRBL is easing investors’ fear with a massive breakout on the charts. The company owns a famous rice brand – India Gate Basmati Rice and is engaged in seed development, contact farming, procurement of paddy, storage, processing, packaging, branding and marketing of basmati rice.

Image Description: Weekly chart of KRBL showing a range Breakout

Image Source: Investing.com

Shares of KRBL were rising consistently since the broader markets bottomed out in June 2022, except for a minor hiccup when the export curbs were announced. However, today, the rally did not just continue but has even accelerated. The stock soared around 11.5% to the last traded price of 347.75, by 12:06 PM IST, which is the highest level in over 3 years.

The stock broke above a strong resistance of INR 330 – INR 340 in style. This resistance had been tested many times in the past and therefore today’s breakout holds significant importance. A closing is definitely preferred above this resistance level, but as the current momentum is quite strong, closing is not looking like a big task for the stock.

On the volume front, investors’ participation in today’s move is clearly visible. A total of 4.93 million shares have exchanged hands so far in the day which is higher by around 280% from the 10-day average of 1.3 million shares. The breakout is also getting the volume confirmation, making it more reliable.

As the stock has finally surged past its consolidation phase of over three years, the rally from here could potentially be quite strong. However, investors have to wait patiently as this is quite a long-term breakout, the potential targets of which would also take a long time to be achieved. Ignoring the 2020 pandemic crash and calculating the height of the range, the potential rally could hit a level of INR 500 in the future, giving it an upside of around 45% from the CMP. Again, these levels should not be deemed to be on the screen in the next couple of weeks. As the rally in the last few sessions has been quite sharp, investors might be looking at a retracement from the current levels to participate in the rally.

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