ITC: Fresh break out can push stock towards Rs 265 level, charts show

Shares of cigarette to fast moving consumer goods (FMCG) conglomerate ITC are up over 9 per cent in a week. Moreover, it has gained about 6.6 per cent in 3 days after the government in the Budget 2022 proposals left excise duty on cigarettes untouched. The shares were trading 0.7 per cent higher at Rs 233 per share on the BSE at 12:35 PM, as against a 0.8 per cent fall in the benchmark S&P BSE Sensex. 

According to analysts at JM Financial, ITC has the potential to reverse the long period of lacklustre performance. "We cite government's increasingly logical stance on tobacco taxation to be one key value driver for the stock going forward. The government is likely now able to better appreciate the legal industry's logic that a punitive taxation regime on legal cigarettes alone does not necessarily  help control use of tobacco in the country but instead causes migration out of tax-paid cigarettes into illegal channels," it said in a report dated Feb 2.

They also believe strong growth trajectory in the coming years, coupled with incubation of a reasonably large FMCG business, will bear fruits for the company.

The board of directors of ITC is scheduled to meet later today to consider and approve the financial results of the company for the quarter and nine months ended 31st December, 2021. The board will also consider declaration of interim dividend for the financial year ending on 31st March, 2022.

Ahead of the results, here's how the stock looks on charts:

I T C Ltd (ITC)

Likely target: Rs 265.30

Upside potential: 13%

The shares of ITC Ltd are all set to rally towards its 52-week high level of Rs 265.30 as it breaks out from the "Double Bottom" formation on the daily chart and crosses the trendline resistance on weekly chart.

Moreover, the Moving Average Convergence Divergence (MACD) has reversed before dropping below the zero line, as per the weekly chart. This illuminates the losing momentum, which is pushing the stock to higher highs. The Relative Strength Index (RSI), which has seen bullish bias in the range of 50-45 value, has formed a positive crossover with increasing volumes, which signals that price action could gain strength in coming days.

If the stock manages to hold its immediate support level of Rs 225, the bulls are intended to add stocks for long term gains. The next support is set at Rs 210, where the stock managed to rebound twice pewviously. 

On a bigger perspective, the ITC shares crossed 200-weekly moving average (WMA) in September 2021 and retraced to test the support of 50-WMA. Now, as it flies back above the same, the momentum of the 200-WMA breakout seems to gain upward direction with rising volumes. CLICK HERE FOR THE CHART