Sugar stocks are up despite weakness in the broader market; are they back on traders’ radar?

The sugar stocks are back in action as they soared 3-10% on Friday.

The sugar stocks have seen fresh buying interest as they soared between 3%-10% during the initial hours of Friday’s trading session. According to the reports, the government is encouraging sugar companies to drive excess sugar cane into ethanol which is used to blend with vehicle fuels. Some of the key sugar stocks like Ugar Sugar (+9.39%), Mawana Sugars (+8.51%), Shree Renuka Sugars (+5.22), Avadh Sugars (+4.59%), Dwarkesh (+3.89%) and Balrampur Chini Mills (+3.09%) have seen strong buying sentiment despite weakness in the broader market.

Nearly all of the sugar stocks have performed well in 2022 and outperformed the broader indices by a huge margin. Key drivers were the good demand in exports while strong prospects of growth in ethanol blend have taken the sugar stocks to whole new levels. The positive price structure of these stocks indicates the possibility of a strong uptrend in the medium term.

Meanwhile, the stock of Ugar Sugar has confirmed a breakout from its 38-week cup pattern with huge volumes. After a retest of the breakout level of Rs 85, the stock has witnessed strong buying activity as it soared over 10% this week. The 14-period daily RSI (68.41) indicates strong strength in the stock, while the MACD is about to signal a bullish crossover. The OBV movement is positive and depicts strong volume buying. The TSI and KST indicators are bullish. In general, the stock holds higher chances of a stronger uptrend in times to come.

Interestingly, similar movements have been observed in other sugar stocks as well. On a YTD basis, most of the sugar stocks have generated over 50% returns to their shareholders. Also, the companies have declared strong double-digit growth in recent quarterly earnings, thus grabbing investors’ attention. 

Momentum traders should keep a close eye on sugar stocks for upcoming trading sessions! Do you think sugar stocks are ready for the next big rally?