SBIN: Technical Analysis of an Upside Opportunity

Hi All,

Sharing a very detailed analysis of SBIN. I have covered the though process from the first look of the chart to the drawing the final conclusion of a probable run-up with 5 explanatory infographics. 

Follow this link for a downloadable PDF version of the analysis. 

Your comments below are welcome. 

Thanks for reading!

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Kavita Chamaria

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CRUDE OIL: The damp days to return, another price decline on the charts

 Hello Reader!

While the world grapples with the aftermath of COVID-19, the business and finance world is struggling to adjust to the new realities as well. With lowered top-line across most of the businesses, the emergence of new sectors, higher digitalization stands to threaten several status quo previously prevalent. over the next year, we will witness many businesses go down the same path producers of chariot whips and boot heels for men did. Evolution is the key to survival for businesses. 

But what about the cost? The lowered crude oil price has send many businesses into a frenzy. Government and businesses have openly filled in their crude oil reservoirs with what they perceived as never to return cheap prices. However, what if I told you that the lower prices were returning soon? 

A simple technical analysis of the crude oil charts across different time frames has a well-knit story of the downtrend which has been unfolding on the charts of crude oil since the crash in 2007.

Crude Oil stands at $41.8 per barrel. This is historically a very important price zone. On several different occasions in the past, crude oil has taken support at this level as highlighted in the chart below. Now, with the world being a very different place, $41.8 is posing as a strong resistance. This fungible nature of price levels is quite commonly observed across stock indices, individual stocks, currencies, and commodities. 

                                    Crude Oil: Monthly Chart- Period shown : 2009 to 2020

Lower-highs, lower-lows have been observed in crude oil post the 2007 crash. The Primary trend has been down with intermittent rallies. Since April 2020, one such minor trend upside rally has been witnessed.

A quick glance at RSI shows how a penetration below the level of 30 has meant more bad news for crude oil. Back in Dec 2014 when RSI broke below the level of 30, prices could only temporarily recover after that. Soon in Jan 2016, crude oil forged a new price low after falling 50% from its recent high of $61 to $27 per barrel.

History can be seen repeating itself. Today, crude oil price stands at the strong resistance zone of $42 PB, with lost momentum and at the edge of a cliff. It is only a matter of time when crude oil prices will fall again and forge a new below $20.  We are discussing the possibility of a 50% price slide from the current levels as indicated by RSI. 

                                    Crude Oil: Weekly Chart- Period shown: 2009 to 2020

After having looked at the monthly and weekly charts of Crude Oil, the story recited by the Daily chart is no different. It reverberates the eminent message of downfall by means of the Negative Divergence between price and RSI. Negative divergence is an indication of lost price momentum. It is especially potent when it occurs close to an important price resistance (like $42 in this case) after a prolonged rally.

All across the time horizons- monthly, weekly, and daily, the tale of weakening crude oil prices can be heard loud and clear. It is best to be cautious and brace ourselves for what is to follow. The pain of hammered crude oil price is going to resume.

 

                                    Crude Oil: Daily Chart- Period shown: March 2020 to Aug 2020. 

 That's all on crude oil. 

Thanks for reading!

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Balrampur Chini and Bata India: Stock analysis update

Hello Readers!

Please find the follow-up on the analysis of Balrampur Chini and Bata India below. I will be sharing the rest with you soon along with some fresh stock analysis!

BALRAMPUR CHINI: Give it a break! 

Ticker: Balramchin
CMP: Rs. 101.40

After our initial analysis  of this stock we also had a follow up post on it . Let us move on to the current chart's analysis. 

ANALYSIS: Having made a high of 120 from the level of 71 where we spotted it, Balrampurchini has started taking a healthy correction. Support appears to be at the level of 86-92 which is the 50-61.8% correction from the peak. Once that level is achieved, we will look at charts again and take a call about the outlook. However, owing to the government’s move of producing ethanol directly from sugar, I believe the fundamentals continue to be very strong. 

BATA INDIA: Ready for a Sprint! 

Ticker: BATAINDIA
CMP: Rs. 1004

Original analysis: https://kavitatechnicalanalyst.blogspot.com/2018/10/bata-india-walking-on-slippery-ground.html

Analysis: In the previous post we mentioned a lack of confidence in Bata’s up-move around 950 levels. However, despite the seemingly weak technical outlooks in my opinion, Bata touched a high of 1030 odd levels and turned lower for a correction which took it to the sub 950 levels. Post the correction the price of Bata has started rising again and this rally is supported by strong technical too as shown above.

The probably target at this point is 1100 in the near term.

That is all for today. Please do share your feedback, appreciation and especially criticism. You can reach out to me directly via email kchamaria1993@gmail.com. Dont forget to follow my blog for regular updates directly in your inbox. 

Nifty 50 - A short analysis

Hello Readers!

Market is a house of mayhem as we know it right now. Even though today was a day to breath easy, I believe the worst is yet to come. 

Enjoy the read and do follow my blog by clicking on that blue 'follow' button at the right side of your screen!

__________________________________

 An analysis of Nifty 50

Nifty has corrected nearly 880 points from the top of 11770, that is 7.5% so far and has recently forged a low of 10866 which is below the monumental psychological support of 11000. Yesterday, things got even worse as the index closed below the fatal 100 daily EMA. Today, despite the recovery it failed to cross back above the 100 EMA even on an intraday basis and this shows that the 100EMA is now working as a resistance area.

Nifty Daily- Captured on 25-09-2018. Correction expected to continue. 

Highlighted on the chart, I expect the correction in Nifty to continue for another 500 points or so. The support thereby lies in the range of 10575-10500. There are multiple reasons for drawing this conclusion, along will a few conditions for the success of this analysis.

Purely technical reasons for expecting continued correction:
1) Breach of the 100 day EMA on the daily chart
2) Breach of the level of 40 on daily RSI, which is a support zone for the indicator in a bullish market
3) Breach of 10880 on intraday basis which was a strong potential support zone due to several factors

Some macro reasons for expecting continuation of this correction:
1) Continued weakness of Rupee
2) Bullish crude oil charts (analysis to be presented in a separate post)
3) Increasing tensions of tradewar plus the U.S. sanctions on Iran's oil industry puts India under alot of pressure as the alternatives are costlier (Read more here) 
4) State oil companies may reduce inventory in the face of rising oil price. But because they only hold 7-8 days of oil inventory, reducing that level will only control cost for a very short time period and will instead lead to increased cost in the face of further increasing oil prices (read more here). This will hurt the economy and naturally push up the oil prices and the cost of fuel further, aggravating the pain. 

Condition to this analysis:
A close above the 35 EMA (11350) will be a potential continuation of the uptrend and end of correction as it is an important resistance zone, though very unlikely as per charts, but we have got to keep an open mind when it comes to the stock market.

That's a short and crisp analysis for you. I will be coming up with a more detailed analysis of Nifty soon. 
Here's a teaser: It will include the Elliot Wave count and I believe the correctionary A-B-C wave is underway. So stay tuned! 

I also intend to come up with posts on the following: 

1) Take a look at Britannia because your evening snack just got more attractive!

2) Follow-up on Balrampur Chini which continues to impress! 

Thank you for taking out the time to read my articles.

You can find my detailed  analysis on three stocks- BALRAMPUR CHINI,  FRETAIL and REC.  

As a disclaimer, this isn't a recommendation but a mere observation of a great phenomenon unfolding on the chart.
Another disclaimer: I am long on Balrampur Chini and REC Ltd (bought after the above article was posted).
A warning: Anyone investing in Balrampur Chini, OR ANY OTHER STOCK/INDEX,  based on this article is doing so at their own risk. Please be responsible.

QUICK UPDATE- Balrampur Chini and Future Retail

TICKER: BALRAMCHIN

Since the post on Balrampur Chini  on Aug, 23rd, the stock has been performing well. Things are looking up on the stock's chart. The price action recently gave a pull back after closing above the 100 day EMA for 3 consecutive days. The pull back found support at the 50 day EMA and soon enough bounced back piercing the 100 day EMA level of 77.05 and closing at 77.65. The stock has again open with a strong gap up today morning. 

All the conditions for calling the current trend an Uptrend on this chart are ticking off. 

• The stock is making higher-highs and higher-lows
• The important Moving averages have been breached.
• Volume is picking up on the up-days
• RSI has shown range shift. It has not breached the level of 40 corresponding to the recent price lows which indicates a strong momentum build-up in my opinion.

A snapshot of the chart as on day is presented below and you will be able to observe all of this on this chart. 

For a more detailed analysis of this stock, you can follow this link here to the original post. 

Balrampur Chini (Daily) captured on 6-9-18. Pull back and continuation

 TICKER: FRETAIL

Our next follow up is on Future Retail.

As we mentioned in our post on future retail on Aug 27th, another leg of upside appears to have begun. The breakaway gap has not been filled (yet). Here again, we can observe a pullback and a subsequent bounce on the dachart. The price turned lower after touching a high of 589.50 and took support at the cluster of 35, 50 and 100 day EMA after which it bounced back yesterday and gave a comfortable closing above the previous high. 

It is a great business and promoters are proven entrepreneurs. Not just that, the Indian retail space is a booming sector and Future Retail is one of the strongest players and hence one of the biggest benefitters. For a more details analysis I request you read the original post here.

Future Retail (Daily), captured on 6-9-18. A trend forming

That's all from my end! Please follow my blog and fill in your email ID to get my next post directly in your inbox. I would love to hear from you guys. Use the contact form to reach out to me!

As a disclaimer, this isn't a stock recommendation.

Another disclaimer: I am not long on Future Retail but I am invested in Balrampur Chini.

A warning: Anyone investing in either stocks based on this article will be doing so at their own risk. Please be responsible.

You can reach me at kchamaria1993@gmail.com for the analysis of other stocks (NSE, NYSE, LSE as long as there is a chart), commodities or currencies, I will try my best to respond.

Until next time, Adios! :D

REC Ltd. - A Story of Cyclicality, Reversal and RSI Positive Divergence

Cyclicality is an interesting concept. Entering a stock when it is at the bottom of its cycle takes courage, sound understanding of the market’s pulse and a lot of guts. Execution takes places on the basis that the worst has happened and what is left to happen is only possible good or nothing. Cyclicality is prevalent in the stock market and does not receive as much credit as it deserves as an investment ideology. 

A prominent analyst who uses cycles to make his stock picks is Mr. Prashant Jain, ED & CIO, HDFC Mutual Fund. I came across an article on Value Research Online which states that he “has a history of being ahead of the markets" and "he has been able to do this by positioning his funds for the next cycle.” I was researching on REC Ltd. and turns out Mr. Jain pickes this stock not long back in May, 2018 itself. The article further observes, “The markets in India have moved in cycles that play out over six to eight years”. I agree with the idea, maybe not with the number since the duration of a cycle in different sectors or markets may not be consistent due to varying drivers.

REC Ltd. is showing signs that indicate a trend reversal. The stock has corrected nearly 60% from it's May, 2017 high of ~225 and forged a pin point low near ~90.

In the past two instances of trend reversal also, the stock turned up to give multi-fold returns after correcting approximately 60% from its high. The same has been put in the table below for your reference. The following chart hold arrowed indication of the tops and bottoms mentioned in the following table. 

Chart 1 REC (Weekly) captured on 31.08.18. Showing the past tops and bottoms

Now that we have established the possible end of the correction phase in this stock, let’s turn to the cluster of evidences indicating the beginning of an uptrend here.

[These are objective technical observations without any reflection on the fundamental standing of the stocks. My preliminary understanding is that besides the possible recent plea of restructuring (parivartan) which the government and REC have taken to the RBI, the mount of debt on the company and on the power sector as whole, is worrisome. But because changes in price trends usually occur in charts before the fundamentals start reflecting a turnaround in any company, we will keep an eye out to pick signs of improvements in the books]

Chart 2 REC (Daily) captured on 31.08.18, Showing RSI positive Divergence, spurt in Volumes and Breakout

In the above chart, there are three significant evidences which make me believe the stock might have bottomed out. Let us look at them in details:

1. RSI positive divergence – The point at which REC bottomed out most recently was accompanied by a higher-low on the RSI. The positive divergence is a very effective RSI behaviour and has been an effective leading indicator of a bottom. It is obviously not the Holy Grail or a fail-proof technique, but, the success rate definitely beats it's peers. The positive divergence has been shown using the two slanting lines on the chart. The price was seen making a lower-low while RSI forged a higher-low thereby indicating strong upside momentum in the stock despite declining prices. Soon following the positive divergence we saw a one-sided strong rally which took the stock of REC very close to the previous high marked on the above charts by blue and pink arrows respectively.
2. Breakout with high Volume- Volume has been showing good support to this trend reversal. We can observe two clear volume spurts on the recent volume data in the above chart (indicated by the box). A close observation of the price and volume behaviour shows that not only has volume been picking up on the up moves in price (indicating strong consistent buying called accumulation) but also, volumes declined upon consolidation.
3.  Breakout- The price has shown a breakout above the level of 118 which was the resistance zone and that with strong volume. This move above the recent high formulates a higher-high. To further substantiate this trend reversal I am hoping to see further gain in prices followed by a correction which holds above the previous low. For now, the stock continues to inch higher.

Now moving on, let us discuss the potential resistance zones on the chart.  

Chart 3 REC (Daily) captured on 31.08.18, Arrow marking the important support/resistance at importance price levels

The above chart highlights two zones of resistance at 150 and 186 respectively. The past instances of price reversals at these zones has been highlighted by arrows for your reference. I believe now that the price has surpassed the resistance of ~115 after taking resistance, showing a pullback and subsequent breakout with volume support, 115 should act as the new support level.

If you look closely at the above chart, the blue line running through represents the 100 EMA. It lies at the level of 115 thereby reinforcing the role of the level as an important support for the price.

This is all I have to say about this stock, REC Ltd.

Thank you for reading. I would appreciate your feedback and comment on this post.

A new "follow" button has been introduced to the blog, please subscribe and share your email ID to receive the future posts directly in your inbox.

As a disclaimer, this isn't a stock recommendation but a mere observation of a great phenomenon unfolding on the chart.

Another disclaimer: I am not long on this stock. 

A warning: Anyone investing on the basis on this article will be doing so at their own risk. Please be responsible.

You can reach me at kchamaria1993@gmail.com for analysis of other stocks (NSE, NYSE, LSE as long), commodities or currencies, I will try my best to respond.

Balrampur Chini: Bottom fishing (A study of range shift in RSI)

Hello friends!

I am back with a post after a long period of dormancy. I was never off practising TA but wasn't writing about it for various reasons (like laziness). But now it's time to dust our sleeves and get back to business.

I have spotted a compelling chart which really got me out of the dormant state and urged me to post about it!

That stock is Balrampur Chini!

Please refer to the chart below:

Balrampurchini Daily Chart captured on 24.08.2018

I am a huge fan of the momentum indicator - Relative Strength Index (RSI) and it was RSI's range shift phenomenon which has drawn my attention to the chart of Balrampur Chini.

In the above chart, you will notice arrows marking the beginning of major rallies. These arrows are actually highlighting the range shift in RSI - the phenomenon wherein RSI breaches the overbought zone of 60 to indicate higher momentum in the stock at relative price lows and at the end of corrections. This change in stock participant's momentum- where the buying momentum supersedes the selling momentum, is captured by RSI beautifully.

On the chart we can see that out of the past 4 instances, only one instance has been a failure where the range shift 's indication of a rally failed. Some might argue that the sample size of the observations is too less to conclude the range shift phenomenon to be any good in the above case. If you're one of those people then I advise you check out the older data of the stock and you will see the answer for yourself. There are more hits than misses.

The misses (indicated by the red arrow on the chart) have very distinct characteristic to themselves. Everytime the RSI has breached the level 60 soon after breaching the oversold level of 30 deeply, has lead to a failed rally. Basically, range shift works both ways. If you have RSI racing past 60 after a sluggish move where it held its nose above 30, then that gives a good indication of an impending rally, but the same move after a deep dive below the level of 30 just indicates shortness of breath and a bad (failed) rally.

To add to the above observation, the stock has also successfully made a higher high and a higher low which indicates uptrend. It is currently resting at the kissing point of the 35 and 50EMA. A crossover of the 50EMA above the 35EMA would make me more comfortable with this upmove.

If you look very closely, there has been alot of volume activity near the bottom of the chart just before the higher highs and higher lows came into the picture (literally). This for me is an indication of accumulation by big cats (the guys who knows the whats and whens before everyone else).

The stock also resisted the 100EMA (blue line) is the last rally so naturally moving above this level would be a confirmation of the rally and trend change.

I am expecting a 100% rally in this super cyclical stock post confirmation. Also, a breach of the previous low (59.70) is an exit for me.

As a disclaimer, this isn't a stock recommendation but a mere observation of a great phenomenon unfolding on the chart.
Another disclaimer: I am long on Balrampur Chini.
A warning: Anyone investing in Balrampur Chini based on this article is doing so at their own risk. Please be responsible.

The above observation is purely technical. Anyone with a fundamental insight on Balrampur Chini is invited to share the same, we can put up a collaborated article ( no pay for that :p).
I will myself try to come out with some fundamental insights (only if I get the time, no promises). You can reach me at kchamaria1993@gmail.com for the analysis of other stocks (NSE, NYSE, LSE as long as there is a chart), commodities or currencies, I will try my best to respond.

Until next time, Adios! :D

Footnote : The article was published before rally witnessed in Balrampur Chini today. It close 5% above yesterday's closing.