Tasty Bites: A reversal or a dead-cat bounce?

Overall, the company is in good financial shape, by reporting growth in revenues and profits.

Tasty Bite Eatables Limited is engaged in the business of manufacturing and selling prepared foods. The company offers a range of ready-to-serve ethnic food products under the brand name Tasty Bite and Frozen Formed Products. It is a smallcap company with a market cap of Rs 3,201 crore. The stock is majorly being held by the promotors, which is about 75% of the total company’s shares. The public and the institutions hold about 21% and 4% stake, respectively.

Overall, the company is in good financial shape, by reporting growth in revenues and profits. It generated higher revenue than its average industry revenue in the last five years. Thus, the company business is in strong hands.

However, the performance of the stock has been mixed, as it has delivered good returns of 21% since the start of January 2021 while it has performed badly in the last three months where it registered negative 22% returns.

Today, the stock has soared over 14% when the overall market witnessed a huge sell-off. The stock hit a fresh all-time high of 21,487 on July 8, 2021, but then it witnessed major correction and never looked back. It is currently below its 200-DMA by over 11%. However, the RSI has jumped to 55 after today’s strong performance. The ADX is currently at 33 and rising, which indicates a strong uptrend to follow. Moreover, the price action is backed by huge volume which validates the bullish point of the technical indicators. Such huge volume has been recorded after many months, which indicates fresh participation of the market players. It is also currently trading above its 20-DMA. Moreover, on the weekly timeframe, the stock has made a bullish engulfing pattern.

The stock has outperformed the market decisively today. However, it remains to be seen whether it is a reversal or just a dead cat bounce. The major resistance zone lies at 15,000 and any closing above this level with huge volume will indicate an uptrend for the near term.