A Bullish Trading Opportunity in Alcohol Stocks

Hello viewers. Welcome to the Fast Profits Daily. Myself, Brijesh Bhatia.

Markets have come back very, very strongly in the last week. We saw one of the finest weekly gain of around 3% after a long, long time. And if you look at the momentum, not only the Indian markets, but even US markets have been coming back very, very strongly. If you look at the S&P 500 it made a low of around 4,100 and back towards 4,460 levels now.

So the momentum is coming back very strongly global equities as well and surprisingly, in the Indian markets, this recovery, the sectors which are rarely being traded in the midcap space, which has more midcap stocks, sector wise, they're coming back very strongly.

I did a video last week on sugar stocks which have been trading around 52 week highs. I did a video on paper stocks, most of these stocks are breaking out of their range. And these stocks are being never cracked regularly. If you look at the largecaps wise or midcaps wise because they don't have a sector.

Similarly, in today's video, I'll be doing one sector where there is no sector specific index. But yes, the stocks are coming up very, very strongly. These are the alcohol stocks.

Now the momentum is coming back into the alcohol stocks on the bullish side and most of the stocks have been seen a sharp recovery from the lower levels. McDowell from the lows of somewhere around 770-775, back above 900 levels. We have seen UBL coming back strongly. Most of the spirits stocks are coming back very, very strongly.

 

So we created one index. If you look at the screen over here, we created an equal weighted index for alcohol stocks. The stocks we have taken have a minimum marketcap of around Rs 1,000 cr. So the stocks are McDowell, United Breweries, Tilak Nagar, Global Spirits, GM Breweries, and Radico. So these are the few stocks which we have taken to create its index.

Now, if you look at this index, way back in 2001 it broke out of the falling channel structure and then there was a huge, fast and furious rally. Similarly, If you look at now in 2022 over here, it is breaking out of the bullish head and shoulder pattern over here now.

Coincidently, if you look at this orange line which is the 200 days average of this index, most of the reversal happened at 200 days average. And if you look at the channel breakout, it tested the low of 200 days average, went higher.

Similarly now, in tested the 200 days average and is breaking out of the bullish head and shoulder structure, which was broken last week.

On the lower panel, if you look at the RSI, basically it's the stamina or the strength of the momentum, similar to last year 2021, it broke out of the trend line of the bullish range. The shift has been visible. Similarly now as well, the history is repeating and the bullish range shift is happening in the index.

It indicates that the momentum is very, very strong in the alcohol stocks, and you should not miss this fresh momentum building up.

We wanted just to check this equal weighted index if it is outperforming the Nifty 500 Index. Why have we taken the Nifty 500? It's because most of the stocks are from the midcap space and that's the reason we have taken the Nifty 500.

 

So look at the chart over the here. This is the weekly chart over here of the equal weighted alcohol index, which we created, and compared it with the Nifty 500.

Now, if we look at the 2015 highs, the 2018 highs, and in 2021, we broke out of that previous resistance level, and it is being retesting again. Now, if you look at this channel structure right from 2019-2021, it took around 27 months of underperformance being taken out, and why I'm focusing emphasising on the number 27 is because it's the Fibonacci number.

Generally, when this Fibonacci time cycle breaks out, it tends to give a huge rally and though we have seen a huge rally coming up right from around 0.28 back toward 0.4 levels, but I still think that there is a fresh room available in the outperformance of alcohol stocks over the Nifty 500.

 

So if we look at the fresh highs on this outperformance chart. We did a top down approach and went to the daily chart now. If you look at the daily over here, the orange line again is the 200 days average of this ratio chart.

It has been turning back on the outperformance of alcohol stocks right at 200 days average. Even if you look at the lower panel over here, the MACD, the MACD has given a positive move into an extreme oversold zone.

So I will leave these alcohol stocks still have a huge room and may outperform by a big margin, probably in 2022. When should not miss the alcohol rally over here. Any dips, I think it's good accumulation level. You can just look at the charts which are outperforming into this index, and you can look at the investment into this alcohol or spirits stocks.

So signing off Brijesh Bhatia.