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Today’s session was a historic day for investors as the benchmark index touched 20,000 for the first time ever. Investors’ enthusiasm can be gauged by the fact that all sectors closed in the green zone.
While there were many breakout stocks that could be spotted, investors should have a look at Shah Alloys Ltd (NS:). It is a small-cap steel producer with a market capitalization of INR 116 crore and trades at a TTM P/E ratio of -40.6.
The stock has been following a series of higher highs and higher lows, which is the classical representation of an uptrend. To further confirm the upward direction, the stock is comfortably trading above its 21-day simple moving average (SMA). This trend-following indicator is probably the simplest of all in determining the trend direction, which is up in this case.
Image Description: Daily chart of Shah Alloys with volume bars at the bottom
Image Source: Investing.com
Today, the stock surged to hit a 10% upper circuit at INR 64.7. Although I generally don’t consider volume figures when the stock hits a circuit breaker, the volume backing this move was recorded at over 192K shares which is the highest in 2023. So, investors’ interest is definitely there.
Shah Alloys shares managed to close above the resistance of INR 63 which is now painting a bullish picture for the short term. This ongoing rally can now be extended further to around INR 71 which is where some selling pressure can be witnessed.
As this is a low-volume stock, the move can be sharp due to a lack of sellers. This is also the reason why a very heavy position should not be made as it increases the impact cost and makes it difficult to enter and exit.
It is tricky to spot an ideal stop loss level, but a level of INR 55 can be taken as a reference point and the order should preferably be executed on a closing basis to avoid whipsaws which are quite common in such stocks.
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