BATA INDIA (Update): Not convinced with the bullish story

Hello Readers,

In the previous post, I spoke about a lucrative short bet on Bata. The reason was simple, weak evidences on the chart.

Today I reanalysed the stock to try and come up with a revised analysis as the resistance has been breached and the stock is trending upwards. However, upon a close look, the story which is being told by the consortium of price, volume and RSI is not in agreement with what a strong bullish stock should look like. The evidences suggest that the ongoing rally is being supported by a few big players who are influencing the price. The retail participants are majorly selling the stock and we know that without retail participation in buying, no stock can continue its rally.

Please refer to the images below for a detailed analysis. I intend to look into the quarterly data soon to try and pick up on whatever is encouraging this 'spike' buying.

Adios, for now!

BATA INDIA- Walking on slippery ground!

Stock Name: Bata India

Ticker name: BATAINDIA

Current market price: Rs. 910

Outlook: Bearish

Target downside levels: 848, 802

Resistance: 927

Hello Readers!

The hourly chart of Bata India is giving weak signals!

The above picture is pretty much self explanatory. There are 3 specific evidences which indicate that Bata India might take a dip in the upcoming trading sessions. Let's look at them technically.

1) The dark blue line is the 200 EMA on the hourly chart of Bata. It has acted as the resistance zone on several instances as highlighted on the chart with blue circles. In technical analysis, moving averages tend to act as very important support/resistance zones across time frames and are used by trades as entry levels.

2) Another factor supporting our bearish view on Bata India is the fact that the trendline had been breached in the previous correction. This indicates underlying weakness even if the price bounced up again. Broken trendlines should be taken very seriously as all major corrections are first signalled with trendline breaches.

3) RSI - our momentum indicator, has reached the oversold zone of 60 and turned lower without crossing to the 60 to 80 zone which is the bullish zone for up trending stocks. It has been observed that a stock which is in the bear trend, reached an RSI level of almostly 60 in pull backs and upside corrections. Many traders use the RSI level of 60 to enter into fresh shorts in a stock which is displaying other signs of weakness and forming lower lows in price on charts of a higher time frame.

This is all I have on the technical outlook of Bata India's chart. If you have additional insights or even opposing views, please feel free to reach out and we can discuss! Healthy learning!

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Nifty 50 - Ready for an upswing!

Hello Readers!

Nifty update:

Nifty has corrected steeply over the past weeks. In the last Nifty update, the macro reasons behind the steep fall in Nifty were stated. In the following days I also posted about the bearish engulfing pattern which had emerged on Nifty's Daily chart and indicated further weakness with an infograph on my facebook page.

Nifty went on to breach the 10200 low exactly as per the analysis stated and closed near 10150 level today. However, the bear trend has been going on for a while now and few evidence on the charts plus an inter-market factor indicates that bears might want to take a step back (temporarily only) for now and let the falling Nifty take a break from all the chaos.

Evidences indication pullback on Nifty's chart:

1. Appearance of the Spinning Top: The candle stick pattern formed on the daily chart of Nifty is a reversal pattern. The spinning top  is a pattern which indicates indecision and represents struggle between the opposing forces (bulls and bears) which determine the trading prices. 

The image below highlights the spinning top and explains the significance of the pattern. The occurrence of such indecisive pattern close to importance support levels is often an indication of bear trend reversal, even if its temporarily.

2. Trendline support: Trendlines offer strong support/resistance zones. Nifty has reached one such strong support level which I believe may help the index take a breather before resuming the corrective movement against the primary trend. The resistance by virtue of another trendline lies at the level of around 11100. 

3. RSI Positive Divergence:  RSI is my favorite indicator. It is a leading indicator and has on several instances given superb signals of trend reversals. Nifty's daily chart has shown one such positive divergence. A positive divergence occurs when the indicator does not forge a new low as compared to the price. This divergence is a hint towards underlying strength. Again, the occurence of the positive divergence near a trendline and close to the oversold zone increases its potency. 

The above three factors are purely technical related. An inter-market factor which also indicates that a reversal in Nifty is due is the weakness in Crude oil price. It has fallen over 5% on 23rd Oct that is today. Crude oil price and stock market are inversely related. Rising crude oil price was a major factor behind the falling stock market price over the past few months. The weakness therefore is expected to provide some strength to the index. 

The above 4 factors are in my opinion sufficient to keep the index from sinking further in the immediate future. The rest will unfold with time, till then, adios!

Link Investments to Goals, not to Market Situations

(URL) 

The initial period of a crisis always holds conflicting information, and is not ideal for investing

UMA SHASHIKANT

When the stock markets are volatile, you always hear conflicting views. Optimists will prod you to be a smart investor and buy when there is blood on the Street. Pessimists will announce the end of the world and ask you to take what is on the table and flee. Investing is that kind of activity. Much as we love to control how our money will behave, there will be unexpected twists and turns. It is easier to discuss risk and how it is an important part of investing, when the going is good. When simple investors see the price of their holdings fall each day, it is tough to make decisions. Here are some pointers to think about.

First, do not be taken in by the temptation to time the markets. Many investors are convinced that if they did not get the timing right, they would make no money. People who say they should have booked profits have actually allocated too much to equity as an asset class, or to a specific product. Think about it. What would you do with the profits that you book? If you are reinvesting, you are adjusting the amount you invested in a stock or product, that is revision. If you are keeping the money in the bank, you are underweighting stocks and overweighting cash, that is rebalancing. Always consider your choices strategically(long term perspective) and not tactically (Short term adjustments to the long term plans in view of opportunity- not suitable for short term investors). Align your decisions to your goals, not the markets.

Second, do not try to catch a falling knife. Professional investors have the benefit of systems that track their positions and profits. They have to implement tactics that can help them compete in a tough market. Simple investors, saving for life’s goals, should not take risks with falling markets. See a falling market for what it is—a steep correction in prices. Do not see a falling market as an opportunity.

Third, act with deliberation. It is easy to be carried away by the panic selling seen in trading counters. Traders take short-term positions and keep a sharp eye on their capital. They pay margins and incur interest costs on open positions. As prices fall, it is tougher to find money for margin while losing on an open position. That is why they sell quickly and panic in a market crash. Don’t imagine yourself in a position that is not your reality. Your funds are yours and not borrowed.

Fourth, a falling tide takes all. After the IL&FS fiasco, non-banking stocks fell due to the fear of downgrades and defaults across the board. Stocks of top lenders with great credentials also fell. Some correct more, some less, but there is all-round correction. This means that the market is reworking the valuation of stocks, based on new information. It is not an immediate buying opportunity, though many will be tempted to see good stocks selling at lower prices. A correction means the definition of what is good and what is no longer good is being altered. A bad balance sheet cannot be corrected overnight. Do not bet too early on what is resilient. Do not buy or sell in haste.

Fifth, watch carefully for clues. When the noise settles down, and when there is an actual concrete plan of action about the defaulting large business, that is when real recovery will begin. All the ups and downs till then will be driven by rumours, speculation and panic. It is not necessary for you as a long-term investor to act preemptively and try to jump ahead and go in ‘before the information is in the price.’ To build a quality portfolio, there is always time, and greater the deliberation, better the output.

Sixth, evaluate what you have carefully. While you are trying to look at the market and identify great opportunities for buying, what you are already holding may be telling you a story. If your stocks are falling steeply and failing to recover even with good news, you may have to book your losses. And if you bought some sector fund, or some specialty fund, you will have to jettison them. In a risky market, quality matters above all else.

—The writer is Chairperson, Centre for Investment Education and Learning

Disclaimer: This article was not written by me. It has been taken from economic times and the author is UMA SHASHIKANT. The advice in this article is very practical and resonates with the motive of my content in general, which is mostly long term analysis. I take no credit for the content. I came across this post on ET and thought of sharing it with me readers due to the educational nature of the article.

The stock market dilemma- What is happening with Nifty 50?

Hello Readers!

It has been a while since the previous post on the index  and a lot has changed since then. Nifty has taken a deep dive and is just coming up for a breath of fresh air.

Let's first answer why Nifty corrected so much?

Is it because of Sri Narendra Modi, our Prime Minister?
Is it because of weak economic policies?
OR is it because of some twisted reason related to Pakistan?

The answer is none of the above!

The index is correcting simply because of global fears and impact of trade war which has interfered with the balance in global economy and its impact is visible via movement in 3 primary assets: Gold, Currency and Oil.

Intermarket analysis

The picture is mostly self explanatory.

Nifty is rallying currently because oil dropped nearly 3% yesterday, but that does not mean everything is back to normal already.

I am not analysing Nifty's moves in this post, that is for another post but for now I would like to emphasize that the correction is not over because the main ingredients (Gold, Rupee and Crude Oil) that determine the direction for Nifty, are still sour.

Nifty has not bottomed, It is only the calm before the storm continues

The volatility is evident from the price action. There is fear and anxiety and retail participants are losing self control in this market.

Correction will continue, even if Nifty takes some rest. And this rest will probably not exceed over 11155. It is best for the retailers to sit on their pile of money and wait the storm out rather than dumping it in the troubled ocean that Nifty is right now.

That's all. Stay tuned to my blog for a detailed analysis of the Elliott Wave counts on the index.

I would really appreciate comments in the section below. Do share the link to this blog with your friends, other analysts and on social media.

Adios!

Fun Fact: I have added links which can take you to interesting articles. If you're a hungry reader, then you will surely have fun!

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!

__________________________________

 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.