Colgate stock on a 9-week winning run, up 28%; Can it shine more?

Strong Q1 earnings, revival in FMCG sector has propelled Colgate-Palmolive stocks; Technical charts suggests that the bias shall remain favourable as long as the stock holds Rs 3,500.

Shares of Colgate-Palmolive have witnessed a stupendous rally since late June 2024. The stock at present is on a 9-week winning streak, and has zoomed 28 per cent during this period from levels of Rs 2,826 on June 21 to a high of Rs 3,615 in trades today. In the same period, the benchmark, NSE Nifty 50 index has gained 5.5 per cent.

The stock is seen trading at record high levels in recent times. The rally at the counter is attributed to revival in the FMCG sector. Further, the company had delivered a strong set of earnings for the June quarter.

Colgate's net profit for the quarter ended June 2024 jumped 33 per cent year-on-year (Y-o-Y), helped by demand pickup and good performance of products. The company's Q1 net rose to Rs 364 crore when compared with Rs 331.40 crore in Q1FY24. Revenue from operations increased by 13.1 per cent YoY to Rs 1,497 crore; beating Bloomberg estimates of Rs 1,429.40 crore.

Earnings before interest, taxes, depreciation, and amortization (EBITDA) margins remained consistent despite the higher investment in advertising, which increased by 10 per cent YoY. 

Analysts at broking firm Nuvama are optimistic on consumer goods sector and have picked Colgate-Palmolive, Pidilite Industries, Britannia, and Bikaji as their top bets. The positive outlook, analysts believe, is driven by robust earnings reports and an anticipated demand revival coupled with distribution expansion.

Going forward, given the 28 per cent rally at the counter, can Colgate stock continue to outperform? Here's what the charts suggest:

Colgate Palmolive

Current Price: Rs 3,600 

Upside Potential: 7.6%

Support: Rs 3,565; Rs 3,500

Resistance: Rs 3,660; Rs 3,745

Given the sharp rally, the price-to-moving averages action remains favourable for Colgate across time-frames. On the daily scale, the stock is trading in overbought territory, and may face some resistance around the higher-end of the Bollinger Bands given the tiredness seen on key momentum oscillators. 

As such, resistance for the stock can be expected around Rs 3,660 levels. Meanwhile, the long-term chart suggests that the overall bias for Colgate is likely to remain bullish as long as it holds above Rs 3,500; interim support for the stock is seen at Rs 3,565. On the upside, the stock can potentially test Rs 3,875, with interim hurdle seen at Rs 3,745 levels.

According to the futures & options data, Colgate PCR (Put Call Ratio) stands at 1.2; indicating presence of more open positions in Puts as against Calls. The highest open interest (OI) in Calls is seen at Rs 3,600 Strike followed by Rs 3,700 and Rs 3,400. In case of Puts, highest OI is visible at Rs 3,400 Strike. 

The options premium pricing suggests potential resistance for the stock at Rs 3,630 and Rs 3,700 levels; whereas support can be expected around Rs 3,500.