The Nifty 50 index, which has been declining for three sessions, down 0.51% to 18,605 by 11:52 AM IST, reflecting the continued bearish sentiment in the broader markets. With 10 of the 11 indexes trading in the red today, the sectoral breadth is likewise thin. Kanani Industries Ltd. is a penny stock that is thriving in this climate (NS: KANN ).
The firm, which makes jewellery and has a facility in Surat, Gujarat, has a market value of just 89 crores of Indian rupees. It is a high-beta stock, and its volatility is around 3.4 times greater than that of the Nifty 50 index.
The stock has been trading sideways to bearishly since mid-August 2022, according to the daily chart. During this trading window, the volume data were likewise muted, indicating lower investor engagement.
But starting on December 5, 2022, both price movement and volume activity appear to have picked up. For the first time after mid-August 2022, the stock touched an upper circuit of 10% yesterday, reaching INR 9.05. There was a noteworthy increase in activity, with 231K shares changing hands overall. The volume on this one day was the greatest in almost a month. Today, the price increased by 10% to INR 9.95. This price increase was supported by a volume that was even higher—360.4K shares—the greatest number in about two months. It is obvious that the stock is reviving and poised to rise.
The 25-period Donchian Channel, which is essentially a band made up of the previous 25 days’ high and low, has given the trend conformation the green light. Similar to a Bollinger Bands® moving average band, this band is a trend-following indicator. However, it uses a different method to determine trend, namely, the high and low of the previous (n) number of periods. It follows that anytime the stock penetrates above the upper band, it is a bullish indicator, and if it penetrates below the lower band, it is a negative one. It had never been able to reach its 25-day high over the aforementioned trading period, but today it did so because of a strong trend.
A breakout above this range and the convergence of volume and price movement indicate the beginning of an uptrend from this point. On the plus side, there is a decent likelihood that the stock may be moving in the direction of INR 12.5
PS: Because it is a penny stock, its propensity to jump from circuit to circuit may make risk management challenging.