Tech view: Near-term outlook on chemical stocks remains highly bullish

Since the negative divergence of the Relative Strength Index (RSI) has not been able to dampen the upside bias, the inherit strength is growing stronger in Tata Chemicals, charts show

Chemical stocks continued to shine at the bourses on Thursday with Camlin Fine, Himadri Special, Laxmi Organics, and Tata Chemcials surging between 1 per cent and 8 per cent on the BSE. In comparison, the benchmark S&P BSE Sensex was up 0.5 per cent at 49,918 at 11:45 am. 

So far in the month of April, stocks of most of the chemical firms have outperformed the benchmark index by soaring up to 42 per cent riding on the back of a firm pricing environment due to strong demand. Chemcrux Enterprises, Alkali Metals, Laxmi Organics, Anupam Rasayan, Balaji Amines, Tata Chemicals, and Alkyl Amines have gained in the range of 9 per cent and 42 per cent while the Sensex has advanced only 0.3 per cent.

Analysts at Emkay Global Services notw that speciality chemical companies are riding on a firm chemical pricing environment amid strong demand from end-user industries and supply-side constraints emerging from time to time, in turn bringing to light risk factors present in global supply chain. Sectors like Automobile, Construction, Consumer Durables and Home & Personal Care positively impacted the revival underway, they say.

Going forward, the brokerage expects chemical prices to subside going ahead given near-term stability anticipated in crude prices and a slight decline in freight costs. "In Q4FY21, our coverage companies should report 16 per cent/38 per cent year-on-year revenue/EBITDA growth. SRF and NFIL should lead the pack with steady growth in their specialty business, while strong pricing in chemical products would benefit BASF’s trading business," it said in a report dated April 6.

Against this backdrop, how do chemical stocks look on charts:

Tata Chemicals Ltd (TATACHEM)

Likely target: Rs 950 -  Rs 1,000

Upside potential: 15.71% - 21.80%

As long as the stock holds the medium-term support of Rs 700, the trend may see an upside towards Rs 950 and Rs 1,000 levels, as per the weekly chart. Since the negative divergence of the Relative Strength Index (RSI) has not been able to dampen the upside bias, the inherit strength is growing stronger, as per the daily chart. The immediate closing basis support stays at Rs 790 levels.CLICK HERE FOR THE CHART
 
 Aarti Industries Limited (AARTIIND)

Likely target: Rs 1,520 - Rs 1,550

Upside potential: 6.59% - 8.70%

The stock has claimed a new all-time of Rs 1,450 levels. This move indicates a successful crossing of Rs 1,390, which was the initial resistance. Every move above this resistance, on the closing basis, reflects a rally towards Rs 1,520 and Rs 1,550 levels, as per the daily chart. The closing basis support stays at Rs 1,3290 levels. . CLICK HERE FOR THE CHART
 
Balaji Amines Limited (BALAMINES)

Likely target: Rs 2,150 - Rs 2,300

Upside potential: 5.39% - 12.75%

The medium-term outlook is well positioned above the support of Rs 1,600 levels. Now, any upmove over the resistance of Rs 1,900 should trigger a rally towards Rs 2,150 to Rs 2,300 levels. The Moving Average Convergence Divergence (MACD) has made a positive crossover indicating a positive momentum for the next few sessions. CLICK HERE FOR THE CHART
 
Alkyl Amines Chemicals Limited (ALKYLAMINE)

Likely target: Rs 6,500 - Rs 6,750

Upside potential: 5.18% - 9.22%

In the last one year, the stock has surged over 500 per cent with a "Higher High, Higher Low" formation. Now, as the stock conquers the psychological level of Rs 6,000, the positive bias is expected to strengthen more. The immediate support comes at Rs 5,500 levels. The overall trend is heading towards Rs 6,500 to Rs 6,750 levels. CLICK HERE FOR THE CHART
 
Navin Fluorine International Limited (NAVINFLUOR)

Likely target: Rs 3,200 -  Rs 3,400

Upside potential: 5.40% - 11.99%

The stock has decisively crossed the resistance of Rs 2,900 levels with the MACD trading above the zero line smoothly. This scenario on the chart suggests a positive bias towards Rs 3,200 to Rs 3,400 levels. The closing basis support stays at Rs 2,900 mark, as per the daily chart. The overall structure of the chart reflects a consolidation breakout. CLICK HERE FOR THE CHART