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Best day for ITC shares in 16 months; what do technical charts signal?

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ITC shares surged to a seven-month closing high on Thursday in their best single-day performance since May 2020. The spike in the sleeping giant comes after a long, much-awaited consolidation phase.

Best day for ITC shares in 16 months; what do technical charts signal?
Fast-moving consumer goods major ITC's shares soared nearly 7 percent to a seven-month closing high on Thursday -- their best single-day show since May 2020. The spike in the sleeping giant came after a long consolidation phase offering only modest movements in a narrow range. Analysts say a breakout was due in the ITC stock as fundamentally it has all the ingredients for a bounce.
ITC shares jumped as much as eight percent in intraday trade before settling with a gain of 6.8 percent at Rs 230.8 apiece on BSE -- their highest close since February 8. Also, it was ITC's biggest percentage spike since Mar 21, 2020, when the cigarette maker's shares had risen 7.5 percent.
ITC shares have moved within a range of Rs 135-353.2 in the past five years.
At the current price, ITC shares are down 3.6 percent in the past one year, and 11.4 percent in 5 years.
While there are no new triggers for the stock from a fundamental perspective, analysts highlight a few positives for the company. Factors such as increasing consumption of cigarettes in tandem with gradual unlocking of the economy, improving hotel occupancy, and rising demand for FMCG as well as discretionary goods are behind the company's bright prospects.
Santosh Meena, Head of Research at Swastika Investmart, said: "Everyone knows the value of the company as it is one of the cheapest counters in the FMCG pack where most of the business verticals are doing well."
So what do the charts suggest for ITC shares?
Technically, most analysts see Rs 240 as a key level to watch for ITC shares for the confirmation of a breakout.
After prolonged consolidation, ITC has witnessed a breakout from the declining trend line on the weekly chart, according to Ajit Mishra, VP and Senior Technical Analyst at Religare Broking.
ITC has surpassed the hurdle of a previous swing high around Rs 228, he said. The upmove is supported by a noticeable uptick in volumes, and the charts now indicate a minor pause around Rs 240, followed by a gradual upmove towards the Rs 270 plus zone, Mishra told CNBCTV18.com.
In case of any profit-taking, the Rs 220-215 zone is likely to act as support for ITC shares, he said.
Sameet Chavan, Chief Analyst-Technical and Derivatives at Angel Broking, said the stock has surpassed key resistance at Rs 217 in a small period. However, on a larger timeframe, levels of Rs 238-240 need to be watched closely, and the breakout will be confirmed above these levels, he said.
ITC has given a breakout at Rs 217-218 on the daily, weekly as well as monthly charts, and a good level to enter the stock now will be Rs 225, Miraj Vora, Analyst at IDBI Capital Markets, told CNBCTV18.com.
In the next two days, ITC may revisit Rs 220-225-230 levels, which will give investors new opportunities to enter, he said.
Santosh Meena of Swastika Investmart sees strong support for ITC shares in the Rs 220-215 band. "Any restructuring in the business will be the biggest positive trigger for any rerating in ITC," he told CNBCTV18.com.
Technically, ITC has witnessed a powerful breakout of the double bottom formation seen at the 200-day moving average, he said.
The Rs 235-240 levels are a critical supply zone. If the stock manages to take out Rs 240, it may be considered the start of a fresh bull run, which can take the stock to a target of Rs 285-300 in the near term. Strong support is seen at Rs 220-215 levels, according to Meena.
Meanwhile, ITC shares were among the top movers for Sensex on Thursday, which surpassed the 59,000 mark for the first time ever. (Catch September 16's market action here)
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