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.

The Hot Retailer Stock That's Turning Heads of the Big, Bad Investors!

Hello readers!

Thank you for the support and encouragement sent by you guys on my previous blog post on Balrampur Chini posted on 24^th Aug (Link)

I have a quick post today on another stock which is making a buzz already. The big investors are already in on this for their share of this hot cake retailer chain.  I am talking about Future Retail!

Besides the hot-shot stories spinning out (Read more here) for Future Retail’s stock, the technical indications are also riding strong. It appears to be starting of the next big up-leg in the stock.

Let’s look at the cluster of evidences closely.

Future Retail daily chart captured on 28.08.18, cmp- 556.50

FRETAIL's stock has been in a consolidation for nearly a year now. During this period, the stock has found consistent and strong support at the level of ~470 and resistance at ~640. Going by that alone, the stock has decently taken support at the said level and turned higher making its path to the first resistance zone of 640. 

FRETAIL- 28.08.18 Daily chart close by view

Having established that stock is heading higher, lets establish why I think this move is a sustainable move.
Two answers:
1) The Break-Away-Gap
2)  Strong Volume on the Gap day

The gap up is a significant move here because the prices has been resisting the trio of 35,50 and 100 EMAs indicated by the blue, purple and red lines on the chart respectively. The gap not only let the price break out of this consolidation but also let it surpass above this cluster of moving averages. Now for those who are confused, moving averages are trailing averages of the past price data and pose as good support/resistance zones and also as lagged indicators of price movements. (Read more here)
The occurrence of this  gap with a strong display of volume (you will notice a tall green bar at the bottom of the chart) shows that there is active buying interest in this stock.

I am not laying down any potential target level for FRETAIL because I look at it as a long term opportunity unlike Balrampur Chini which was more like a medium term bet with a mere 100% rally outcome as per my study.

Let's also update you on how our Balrampur Chini analysis is doing.

Balrampur Chini - Captured on 28.08.2018 (Update 1)

The first post on this stock was posted on the 24th of Aug (Friday). After the post, at around 2:00 PM the stock was seen giving a strong run-up and closing +5% up. In the last two days the stock has been resisting the 100 EMA and as mentioned in the post on Friday, we continue to watch out for a breakout to confirm our analysis.

That's all from my end!

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

The above observation is purely technical. Anyone with a fundamental insight on either stocks is invited to share the same, we can put up a collaborated article ( no pay for that :p).

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

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. 

Nifty poised to take a step Lower

There is a lot of energy in the stock market. Everyone seems to be losing their minds because of the continued pumping of money from the FIIs . We all understand that the current rally in the index is backed by sentiments and not by economic improvements and this makes the rally unsustainable. Now, I am in no way suggesting that the bull run is over. I am very bullish for the long term, however in the intermediate term, I believe there is a possibility of a set back, or a 'correction'.

Let's take a look at the 1 hour chart of Nifty. 

Nifty 50 1 hour chart, showing weakness

In the above chart two trendlines are visible (I would'nt call it a channel since the lines are not parallel) . 
In the last couple of days, we see that the trendlines have been violated. The resistance trendline was violated in the sense that the index turned lower without touching it, and the support trendline got violated by an outright breakdown .


Lets take a closer look in the chart below.

There are a few things that demand our attention  in this chart:

1.  Nifty failed to touch the resistance trendline on 8th Aug, and turned lower irrespective on 9th Aug.

1.  Nifty breached the support trendline on 10th Aug just before closing , however on 11 th Aug it bounced back higher from the 200 SMA closing at the trendline, trapping the bears.

1. On 12th Aug, when Nifty opened, a strong surge took Nifty higher on account of evident short covering after which a lull fell on the index and the rest of the day was spent in consolidation. 

1. RSI , our momentum indicator, has picked up the sentiments correctly in my opinion as it maintained itself below the level of 60 signalling weakness. 

1. The very last candle on the chart is a red candle with a small upper wick, and this hints to us that the market was weak as it closed and had been open, weakness would probably have continued.  

-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Thank you for taking out the time to read this post. 

It will be fair to conclude that given the movement witnessed on Friday (12th Aug) the bulls are not very enthusiastic but the bears too are rather timid given the burns they witnessed on 10th and 11th August. 

The major reason behind the surge in Nifty was, I believe, the result of the banking major, SBIN which was announced at 11 am  on Friday. 

Talking about the way ahead, I do not want to sound overly confident by stating outright that Nifty will turn lower as I have my own inhibitions but the RSI indicators does show weakness in the prices and the rest remains for time to validate. 


You can contact me via email at kchamaria1993@gmail.com for feedback, suggestion, criticism or advise on anything Technical Analysis!

Kavita Chamaria

Blog temporarily discontinued

Dear Reader,

This blog page has been dis-continued temporarily . However that does not mean I've stopped writing.

Kindly visit the website  http://www.elearnmarkets.com/blog/market/  and  http://www.elearnmarkets.com/blog/technical-analysis/  for various article which I have put together on different chart patterns, stocks, currencies etc, and a daily and weekly Market Wrap which states what moved the maket all day and all week.

I request you to please read what I write and criticise it to the best of your ability, let me know it all in the comment section or just email me at kchamaria1993@gmail.com :D

Slivering the SILVER!

Hello Readers!

Today we discuss a commodity for the first time!

In the daily chart of SILVER given below, you may note the Range Shift in RSI corresponding to the change in price trends. During the Uptrend, RSI has maintained a Range of 35-70 whereas in the downtrend, the range has shifted to 20-50.

Like the range shift loyalty, amazing reliability has come from the Bollinger Bands. The upper band has shown commendable resistance every time the RSI shifted to the Bullish Range. Given that, in the current range shift also, the upper band level of 36300 is expected to be a good resistance. However any move below the 34200 level and failure of RSI to move above 50 would mean a dismiss of this analysis.

SILVER , Period: DAILY, Last updated: 4th Sept, 2015. 

On the Weekly chart of SILVER given below, we study the Bollinger Bands. 

Every constriction on the bands in the SILVER WEEKLY chart has resulted in a sharp move. Presently, there is evident constriction between the bands and keeping in view the weekly RSI's strong support at the 40 level, we can conclude SILVER is expected to move up from here with a different and riskier target of 40000, i.e. till the upper bollinger band. 

SILVER, Period: WEEKLY, Last updated: 4th sept, 2015.

UPDATE (10th Sept, 2015, 10:50 AM)

silver ready to bounce again, after touching a high of 35988, it has taken support at ~35260, the sl changed to 35200. anyone who would like to make up for the missed opportunity, now is a good time.

SILVER , Period: 30 mins, 10th Sept, 2015, 10:50 AM

Thank you for reading!

Please feel free to comment on the analysis.

Anyone seeking detailed analysis on any security, preferably stock/currency/commodity, may email me at kchamaria1993@gmail.com. I'll try my best to help you.

NIFTY headed for deeper water!

"MARKET KYA LAG RAHA HAI?"--- This is the most repeated question of the year 2015 following the 9116.95 high on 04th March 2015. 

Below is an attempt to answer this question.

The market is clearly in a correction(for the better) . It is being said the Indian Economy will take over China in leading Global growth. I believe its true. But does that imply that the Indian market indices are invincible? Nope!

What is begun, has to end. The correction which is underway will see completion.

Below is a detailed Elliot Analysis of Nifty.

The Primary bull run that started from September 2013(~5200) ended on March 2015(~9100) registered a rise of nearly 4000 points. This rise encapsulated the proper 5 waves structure as laid out by Sir R.N.Elliot. 

NIFTY SPOT Daily Chart , Dated- 28th August 2015. Elliot count on Nifty.

I am pinning on the 7200 level because of the following reasons:

      1.7200 level is the level of wave ii 3 [3] as highlighted by the ellipse on the chart below.

      2. A ~50% Fibonacci of the entire primary wave gives us the level of 7150 .

      3. There is always a Fibonacci relation between the lengths of Wave A and Wave C. Wave A was exactly 1180 points (9120-7940) . I'm expecting Wave C be 1460 points long. That is 1180 x 123.60%(a Fibonacci level) = 1458.48. So from the level of 8655(previous high), 8655-1460=7195.

NIFTY SPOT, Daily Chart, dated: 28/08/2015. Showing Elliot breakup. 

   

Such clustering of evidence around 7200 add weight-age to the level. 

Below is a breakup of the corrective Wave A-B-C reflecting Nifty at its current level of resistance which is exactly 61.8% of the the Wave 1 so far into the primary Wave C.  

NIFTY SPOT 4H Chart dated- 28/08/2015. Fibbonacci Levels and Elliot Wave analysis

Few levels taken for the analysis maybe off by 10-20pnts. But in my understanding they do not hamper the reliability of the Elliot and Fibonacci tools. It would be very interesting to note than ever since Nifty has hit the 9000 high, the RSI indicator has evidently undergone a range shift. Early the indicator would cross the 70 mark and stay shy of 40, but at 9000, the indicator did not pass above 60 and also broke the 40 mark to take support at 30 several times. 

These elements help in judging the pulse of the market and are crucial for analysis.

Thank you reading. 

Please feel free to comment on the analysis.

Anyone seeking detailed analysis on any security , preferably stock/currency/commodity, may email me their requirements at kchamaria1993@gmail.com. I'll try my best to help you with my analysis.

Something on the Currencies: USDINR, USDEUR, EURINR

Hello Readers!

Here's a post on a few currencies of the world as we know them. The dollar, the Euro and of course the Rupee.

The EURINR chart is range bound. having formed the triple top formation on the chart, with resistance at 73, the EURINR has begun to dip again. While looking at the bigger picture and a parallel analysis of the USDINR and USDEUR we see that Rupee seems to be getting stronger against Dollar, while Euro is giving signal of getting weaker against Dollar in the coming days.

Hence we can assum with evidence that Rupee will strengthen against the Euro.

If this happens then there will not be a breakout on the eurinr chart beyond the range of 73 , as also indicated by the momentum indicator, RSI, which has reached the zone of 70 and failed to breached it, which is a very bearish sign.

so we have a three fold hold on these currency pairs name usdeur, eurinr and usdinr.

USDINR- Bearish

EURINR- Bearish

USDEUR-Bearish.  

Add caption

The individual Chart analysis is as follows.

EURINR

Currently undergoing a choppy movement between the range of 73.0 and 68.50, there is evidence on the charts to believe that the INR will strengthen against the EUR and pave way for the support zone of 68.50. whether it completes the journey to tthe support level or not is a matter of time, but individual analysis tells us that there will not be a breakout above the zone of 73.0 atleast in this movement. 

Moreover the RSI has given a top of 69.0474, just shy of 70, a bad signal. 

EURINR daily chart last updated 18-8-2015

 USDEUR

What we see in the USDEUR chart is called the measuring move, wherein a sharp movement in one directed is interjected by a correction in the opoosite direction somewhere in the middle of the entire move. So here, the red downfall from 0.920 to 0.892 was just half the movement and soon we may witness a fall of the same magnitude - heading for the support blue line around 0.880.

USDEUR daily chart , last updated 18-8-2015

 USDINR

The last candle on the chart is called a doji. Due to owning the EOD verison, I am unable to present you with the updated chart here which would contains today's movement also, which has given a lower closing than the last candle in this chart which is called a dragonfly DOJI, an indicator of indecision and probable weakness when appearing at tops.  This indicates that the Rupee has good probability of owning up strength against the Dollar. 

Again RSI in the chart is pretty overbought, not as insistent as in the USDEUR chart, but still, it does indicate chances of a correction here. 

USDINR daily chart, last updated 18-8-2015

Please feel free to comment on the analysis.

Anyone seeking detailed analysis on any security , preferably stock/currency/commodity, may email me their requirements at kchamaria1993@gmail.com. I'll try my best to help you with my analysis.

Technical lead on ACC

For the first time, I've decided I'll share my analysis on a stock. Please note: these are my observations, you are welcome to go along with it , but on your own discretion, I undertake no liability.

ACC

CMP- 1387.40, target price- 1530, stoploss- 1355. 

Below is the daily chart ACC cement which seems like it could rise from the Friday's closing of 1387.40 to a good 1530 in the coming days.

The evidences behind such observations are:

1. RSI has bounced from 30 and is headed higher

2. Good volumes on the previous day 

3. RSI stochastic has recently crossed over the 30 zone and is heading higher, which is a thumps up.

stock: ACC. period: DAILY. DATE: 31ST JULY 2015. Indicating a good upmove from 1387 to 1530.

Keeping it precise. Follow up for more stocks and Nifty view for the coming week.

NIFTY: Its time to take a break!

Hello again!

I'm back to my Blog after ages. Lets recap the events which have happend in the 5 months of unintentional gap since my last blog post on 28th Jan, 15.

In my first post written on MONDAY, 15 DECEMBER 2014, "ELLIOT WAVE COUNT FOR NIFTY SPOT!", 
 I'd written, "

 According to my analysis, Nifty has finished its major 5 wave up-move and is set to finish the 3 wave A-B-C correction. As per the Elliot rules, the correction normally ends at the end of second inter-wave of the wave 5 which lies at 8000.
Hence I am holding 8000 as the target for this correction. Now this should be interfered by a minor bounce-back  to justify the A-B-C format of the corrective wave.

"

...and we've witnessed that happening. Nifty has scaled the level of 8000, registering a low of 7940.30 and bounced back with fair strength. 

The long term picture of the Indian Market is attractive. Its a good time to invest in stocks. But what we'll discuss now is the present and near future of Nifty. 

Please refer to the charts below. Nifty spot, Daily, Screenshot taken on 17th July, '15. The red line marks an important resistance zone which has significant past importance. 

label 1 shows that 8630 has been a turning point in the past .

label 2 shows the occurrence of a gap at the level 8620 again.

label 3 shows that 8630 was a support during the slip from the high of 9000 , thus establishing its importance.

Given this , the presence of 8630 should pose as a resistance to the current rise in Nifty. 

The next thing to note are the blue lines which map the current path of Nifty and shows that Nifty has approached the upper trendline and suggests that it should now reverse to visit the lower trendline.

The labels at the indicator RSI merely show the shift in ranges due to change in the market trend. Please note, when nifty was in a downtrend, RSI refused to move above the level of 60(marked red line) , whereas in the current trend,we've witnessed a positive divergence between nifty and RSI and also RSI piercing the level of 60 with stability. 

The base trend remains up but we have evidences to believe a correction coming with a support at 8550.

NIFTY SPOT : DAILY: 17th JULY 2015.

The chart given below shows a channelled movement in Nifty. It is different from the one in the above chart because the lines drawn here are parallel, and in my opinion more reliable. The first support lies at 8550, near the lower high formed on 7th july and the next sup at 8460.  In case there is sharp move on the downside there might be deeper corrections but the strong RSI does not indicate that happening. The correction can be in a form of consolidation as well, but the level of 8550 should be achieved in the process.

NIFTY SPOT : 2 HOURS: 17th JULY, 2015

Stay tuned for some stock analysis in the upcoming posts.

Thanks for reading!