Divis Laboratory: Will CFO news flow be a spoiler ?

Hello all, 

herein I share my observation on the daily chart of a news impacted stock, Divis Lab. 

Price Action:

During March 2020, the stock made a high of approx 2250 and fell decisively till 1630 zone. Bounce from that zone locked the high of 2550 zone. The top consolidation turned out to be of approx 3 months. Level of 2200 - 2250 became a decent support zone for the counter. On the news impacting the corporate Governance, the stock gap down opened. With strong volumes, it has recovered near the same zone again. Role reversal from support to resistance may come in place, if it doesn't recover above that zone quickly. 

Due to strong recovery, hardly any impact is seen in the line chart, which shows consolidation near major support zone of 2200, as mentioned earlier.  

Fibonacci Retracement:

The present fall from the top seems a counter-rally of the previous bullish rally from the bottom of 1630 to the top of 2550. The gap down opening on the counter got arrested right at the 50% retracement support level, 2080. 

200 DMA:

Price history suggests that the stock is decently respecting 200 DMA. As of now, 200 DMA is placed at 2050. Present fall registered the low of 2090. Seems 200 DMA is again respected in terms of support. 

RSI: 

Overbought and oversold zone of RSI is altered to 35-65, as respected by the counter. It is generally observed that in the ongoing trend, whenever there are healthy intermediate reversals (to make higher bottoms compared to previous bottoms), RSI has turned down till 35 zone and bounced from the zone. Presently RSI registered the low of 35.04, which is supporting a view of healthy correction of ongoing rally. Any reversal sign from price action will get decent support from RSI in terms of strength. 

Ichimoku: 

Ichimoku cloud has a flat support line at 2050. This is perfectly coinciding with 200 DMA. This defines a very strong support. Though prices went below lagging span line, but recovered sharply above the same.  

Volumes:

Attractive volume activity is seen on the chart whenever there is been a decline in the past too. When we study past behavior, due to price recovery from the low, the registered volume was labeled as accumulation volume. The same kind of higher volume was registered in the present fall. 

Putting it all together:

A strong positive trend from longer-term perspective still remains intact. 200 DMA, 50% Fibonacci retracement, and Ichimoku cloud support are all coinciding in the same vicinity. Strong recovery from the same zone supports the view of ongoing positive trends. Stock can be labeled as an accumulation counter without much worry on technical parameters. 

Cheers,

Kunal 

Statutory Disclosure:

Kindly note that this sharing is only for educational purpose. It is safe to assume that my personal position, my fund's position, and my client's, as well as relative's position, maybe open in the counter. Kindly prefer to take the advice of your financial advisor before initiating any position. Prefer to keep the risk-reward ratio in mind based on personal temperament, risk appetite, and financial background.