Breakout Stock: DMart on the Verge of a Breakout

Company Overview

Avenue Supermarts Limited (ASL) is a prominent player in the organized retail sector, operating through its DMart chain of stores. Incorporated in 2000 and promoted by Mr. Radhakishan Damani, an esteemed equity market investor, the company is led by Mr. Ignatius Navil Noronha, who serves as the Chief Executive Officer and Managing Director. As of March 2024, ASL boasts 365 hypermarket stores spread across 13 states and one union territory.

Associated Companies

Align Retail Trades Private Limited: Procures grocery items such as pulses, rice, and wheat from local agricultural produce market committees, packaging and supplying them to ASL. Avenue Food Plaza Private Limited: Operates fast food counters outside DMart stores. Avenue Ecommerce Limited: E-retails food and groceries, serving specific regions of Mumbai and several other cities.

Stock Performance

On Tuesday, Avenue Supermarts’ share price rose by approximately 3%. The stock opened at Rs 4,739.95 and subsequently reached a 52-week high of Rs 4,934.

Technical Analysis- On the Verge of a Breakout 

Technically, the stock is on the verge of a breakout from an inverted head and shoulder pattern. While there is a common misconception regarding the continuation type of this pattern, studies suggest that it exists and is a reliable chart pattern. Edwards and Magee identified the head and shoulder continuation in their book “Technical Analysis of Stock Trends” back in the 1930s.

Avenue Supermarts’ stock rallied 34% from its February low this year to its high in May. Despite several attempts, the stock struggled to convincingly break above the May high, forming a well-defined horizontal trendline, which acts as the neckline of the inverted head and shoulder pattern. Sustaining above Rs 4,900 would confirm the breakout of this pattern. The daily MACD is pointing northward, sustaining above its nine-period average, which validates the positive bias in the stock. Additionally, the daily 14-period RSI has generated a buy signal, moving above its nine-period average, further affirming the positive outlook. Notably, trading volumes have also been picking up.

Comparative Performance

In 2024, Avenue Supermarts’ stock advanced by 19.51%, outperforming the Nifty500 index, which rose by 14.83%. This outperformance underscores the stock’s strength and potential in the market.

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. It is based on several secondary sources on the internet and is subject to changes. Please consult an expert before making related decisions