Look at Britannia's shares! Your evening snack is now more lucrative!

Hello Readers!

Today we will discuss your evening tea ka sathi- Britannia!

Ticker:           BRITANNIA

CMP-             Rs. 5625

Support 1-      Rs. 5580, Support 2-       Rs.5300

Resistance 1- Rs. 5910, Resistance 2-   Rs.6175

Refer to the chart below. We can see that Britannia has trended upwards pretty consistently, and the corrections, which might have seemed scary in the past, seem trivial in hind-sight. 

It is one of those rare buy & hold stocks that grandparents bought and forgot and made their future generations very wealthy!

However, despite the amazing track record, even a stock as mind blowing as Britannia has not been spared the market correction that has stunned the Indian Capital Market due to a plethora of reasons. 

Britannia is currently 20% off from its highest price of Rs. 6934 and that is a lot of correction for a quality stock like Britannia which has grown at a 10 yr CAGR of 35%!

Britannia- Daily chart: Price has corrected nearly 20% from the top

So what's next?

I looked at the hourly chart and this is what I found :

Britannia Hourly chart: Positive divergence on RSI is a positive indication on a small time frame

The hourly chart of Britannia is showing a mild positive divergence between the RSI and price. This indicates that the momentum of correction is going to slow down. It may resort of consolidation before it resumes the uptrend. I am not betting on a very deep correction as the daily chart continues to remain quite healthy and the correction started off without a major negative divergence like in the case of Maruti's chart, which is also a star performer like Britannia but is in the deep red zone and has breached its 52-week low and its correction started of with a sever RSI negative divergence. 

I will look at the resistance level of 6175 because it presents the previous high, breaching which would be a continuation of the uptrend for me. But before that happens, I believe the stock will consolidate like it has done in the past following major corrections like this one. 

Britannia Daily, Covering a long range of price activity and RSI range Shift

The above chart shows the range shift activity of RSI, which has almost always given an early indication of the price behaviour. RSI has shifted it's range to correspond with the trend of price. Like in the uptrend, it maintained a range of 40-80 whereas in a downtrend/consolidation phase, it maintained a range of 20-60. 

Such a tell tale behaviour of RSI is astounding even though it happens across stocks and indices, it still leaves me in awe of this wonderful indicator. 

This phenomenon has been highlighted better in the chart below, wherein the uptrends in price have been shaded in green and the downtrend/consolidations have been shaded in red. We can clearly make out how the RSI accurately reflects the subdued momentum in price movements during cool periods and flares up when it starts trending again. RSI is rightly called a leading indicator.

Britannia Daily- RSI range shift accurately shows the price momentum 

As we see in the right most corner of the above chart, the RSI has recently shifted to the bear zone and this further strengthens my analysis that Britannia will continue to consolidate at this point. However, a move accompanied with heavy volumes below the support zone of 5380-5300 will be indication of continued correction, though I do not expect it to happen, but we have to keep an open mind and be ready for the unexpected.

If you would like to discuss any aspect of this analysis of Britannia, please feel free to reach out to me at kchamaria1993@gmail.com.

This is all for today! Do share this analysis with other stock market enthusiasts like you and me!

Adios!

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!

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 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.

After giving a 25% return in 3 weeks, what lies ahead for Balrampur Chini?

Hello readers!

Here’s another follow-up on the analysis of Balrampur Chini’s stock.

After our initial coverage of this stock on 24^th Aug(link here), it has already given a 25% run-up so far which I feels phenomenal.

But let us not forget that run up is just the beginning. The target lies much further ahead.

After two days of strong upside movement, the stock has dipped. Now, market participants will know it is nothing unnatural because profit taking is eminent after suck a sharp one sided move. But I want to emphasize here profit taking is all it is. The upside should continue going forward. The daily chart doesn’t give up much insight into the move as we can see below. It just shows RSI in the +60 zone which is a positive for the price movement. Another evidence of potential trend continuation comes from the volume on the last two days.

 

BALRAMPUR CHINI- daily chart captured on 18th sept, 2018. 

Let’s analyse the hourly chart to look deeper into the price movement.

The hourly chart below is showing good support present at the 35 hour EMA. I believe this acts a good entry point for those who missed the entry at the start of the trend. As Jesse Livermore has thought us we should always enter the bull trend at dips and this my friend is a good dip of 6% before the stock of Balrampur Chini paves its way to its ultimate target.

BALRAMPUR CHINI- Hourly chart captured on 18th Sept, 2018- Prices showing support at the 35EMA. 

That’s all for today. Please do read the original post here. I would love to hear from you. Please share your feedback via comments. You can also reach out to me directly via the contact me form. 

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

You can find my analysis on two other stocks- FRETAIL and REC.  

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.

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.