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United Spirits, UBL, ITC: How to trade sin stocks ahead of Budget 2020

Illustration: Ajay Mohanty
With a few days to go for the Union Budget 2020, expectations are running high across the sectors. As regards liquor and cigarette industry, reports say the Commerce Ministry has recommended restricting purchase of tax-free alcohol to one bottle at duty-free shops as part of steps to reduce import of non-essential goods. Further, it has also recommended that purchase of cigarette cartons at duty-free shops should be prohibited. These proposales, if implemented, are likely to impact sin stocks. 

That said, let's take a look at how you should trade these stocks before the upcoming Budget - 

ITC Ltd (ITC): After the Death Cross of 200-day moving average (DMA) with 50-DMA in July 2019, the counter has lost the upside momentum. Thereafter, the counter never crossed 200-DMA and even traded below 50-DMA for most of the trading sessions. The support remains at Rs 330 and going ahead if this level is broken with strong volumes, then the downside towards Rs 270 cannot be ruled out as per the daily chart. CLICK HERE FOR THE CHART

Godfrey Phillips India Limited (GODFRYPHLP): This counter is approximately Rs 100 away from the lifetime high of Rs 1,572 level. The overall trend suggests a rally towards the same as all the major moving averages are supportive of the upward rally. The relative strength index (RSI) has seen buying happening in overbought condition indicating selling pressure getting absorbed by buying momentum. Likewise, the moving average convergence divergence (MACD) has been trading above the zero line since August 2019. The immediate support comes at Rs 1,370 levels.  CLICK HERE FOR THE CHART

United Breweries Limited (UBL): In the last three months, this counter made four attempts to conquer 200-DMA but failed. This suggests that unless the 200-DMA is not conquered, a big rally cannot be expected. Currently, 50-DMA placed at Rs 1,252 remains as a support level. The RSI and MACD have made a negative crossovers showing weaker upside. CLICK HERE FOR THE CHART

United Spirits Ltd (USL): The counter recently breached 200-DMA, but did not lose the strength. It is showing reversal signals as it hovers around the same moving average. However, the volumes are not sufficient to jump higher levels. The trend remains positive till it trades above Rs 570, which is the immediate support. The counter may see major breakdown towards Rs 550 if Rs 570 gets breached. Today, USL crossed Rs 600 which was its immediate resistance. This move should take this counter towards Rs 640 and Rs 660 levels. CLICK HERE FOR THE CHART

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