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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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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Balrampurchini- A successful analysis of a cyclical stock

 Here is the original post on Balrampur Chini (sugar stock) posted before the big sweet rally:

(click here >>>) Thursday, 23 August 2018 : Balrampur Chini: Bottom fishing (A study of range shift in RSI)

Balrampurchini Daily Chart captured on 24.08.2018

Regards,

Kavita 

Crude Oil Price Crash for Dummies

Hello Readers,

The recent crude oil price crash is second only to spread of the COVID-19 globally in panic terms. The base for almost all fuels, as we know, has lost nearly 50% from the high of $65 per barrel in last 3 months, of which, nearly 32% has been recorded in the past 5 trading days alone. Crude oil prices are falling like a rock under the influence of gravity.

Two questions come to my mind here-

1) Why?

2) Until where?

To answer the first question first, we know crude oil prices are determined by two primary forces- demand and supply.

On the demand front, China has ceased to be the primary manufacturer, favourite cuisine or  emerging world economy and garnered a new reputation as the epicentre of a pandemic. In the heart of all things that China was best known for, it was also the biggest consumer of crude oil, but come 2020 and the advent of the COVID-19, it has come to a standstill with visibly lower demands for crude as organisations have stop manufacturing operations and people have stopped travelling.

The impact of this is much larger than ever priced in any scenario analysis. The pandemic has touched nearly 115 countries. The globally cascading effect of the disease- operational shutdowns, travel bans- is bound to have a palpable negative impact on demand for crude oil.

Now, the logical solution in a situation of demand set back would be to cut production. However, what is adding oil to the fire here is the current supply flux. OPEC collapsing after the failure of negotiations between Saudi Arabia and Russia to cut production in the face of an already suffering demand paradigm came as a shock for the global trading community as witnessed via the price crash.

Moving on to the next question ’until when’.

The simple answer is- no one knows. However, what we can identify using techniques of technical analysis is a probable support level for WTI Crude Oil. But before that, let’s look at the daily and monthly price charts below.

On the daily price chart, the breach of an important ‘triple bottom’ support level of $42.20 last week, combined with a ‘runaway gap’ is a knell bell and a text book set up for further price decline. The slight bounce in price witnessed after the piercing fall is popularly known as a ‘dead cat bounce’. In simpler language, it means that the bounce has no credibility, it is only an acknowledgement of the knee jerk reaction witnessed in price.

However, if we take into consideration the monthly chart above, the current price crash does not look quite as bad as those witnessed in the past. In both the big fall we have witnessed so far (2008,2014), price has forged a lower high and a lower low at every turning point, thereby confirming a primary downtrend. By definition, the term ‘bear market’ is used when a script/index/future contract has lost more than 20%. However, we are playing with much bigger numbers and calling it a mere bear trend does not do justice to the scenario we are looking at. What is worth noting is that, during both the past price crashes, support came in at approximately 70% price decline from the last peak.

To conclude, having brought to attention similar instances of price crash that have happened till date and taking into consideration that the threat of this pandemic is as real as the financial crisis of 2008 and in fact more global in nature, the pain should at least be at par with the past incident, if not worse. This brings us to the end with a lingering question that would crude prices be driven to a range of $18 to $21PB?  The potential support range incidentally is also the only price support visible on the monthly chart which is below the triple bottom support that was breached earlier this week.

Thank you, for reading!

Regards,

Kavita Chamaria

Strong Accumulation Signals in Mothersumi suggest the beginning of a Strong Upside Rally!

Dear Reader,

Hello again!

The daily chart of Mothersumi is showing the beginning of  a new uptrend on the daily chart. Signs of accumulation are evident. The image below highlights the same.

Mothersumi on 13.06.19 showing accumulation signs

This is a very basic set-up often observed at the beginning of a strong uptrend. The big cats are buying the stock and hence the swell in volumes.

Mothersumi was an all time favourite of investors until the dawn of Electric vehicles brought its twilight. The stock has corrected almost 60% over the past 18 months from the high of Rs. 260.
Currently, the first resistance lies at level Rs.128. A sustained closing above this level would mean a confirmation of the uptrend trend. Accumulating the stock at this level is an opportunity rarely spotted!

Another positive is my favourite RSI positive divergence at the bottom. It is evident in the above chat (not highlighted) that when the price marked the low of Rs. 113, the RSI did not forge a corresponding low but took a support at the level of 30 indication a positive underlying momentum.
This combination of positive divergence in RSI and accumulation in volume is a pretty sure shot way of identifying stocks in the early stage of an uptrend.

Mothersumi is a great company with a top class management team. Following this article I will continue to share the news updates and subtle changes which reinforce/oppose this bullish view.

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Bottoming out formation in BIRLACORP. CMP-Rs.555, Headed for Rs. 680+

BIRLACORP has bottomed out in the charts. I have been following this stock since Rs. 452. 1) The beautiful RSI positive divergence near the bottom was the first indication of a bottom after RSI went oversold. Usually such signals help identify horses for long term. The last time one such signal turned up was in the charts of Balrampurchini.

2) The formation of higher lows is another indication of an uptrend forming. The stock has moved up almost 10% in the last two trading sessions alone.

3) Another positive factor is that the volume picks up during uptrend in the stock.

4) RSI has also undergone range shift and is oscillating in the range of 70-40 instead of 60-sub 30 levels.

5)Pitching for early target of 680, this stock held the support of 491 very strongly during the correctionary phase before spurting ahead in last two sessions.

REC Ltd follow up- 34% return and counting

Hello Readers:

Since the first post on REC Ltd (HERE) the stock has return over 34%. It touched Rs155 recently. I am sharing below a quick update on the call.

Please share you feedback/queries if any

Email: kchamaria1993@gmail.com

Rec Ltd. Weekly chart. After a strong rally, a temporary correction may now ensue before continuation. 

Nifty 50 Analysis: Drawing a plan of action

Dear Readers,

With the festive season behind us and the elections ahead, the market is in a lull state. Many are talking about 'action' coming back as elections draw closer and given that, it is only prudent to have a plan of action ready.

I have presented the hourly chart of Nifty50 below for analysis, but before we begin I would like to draw your attention to the indicator I have primarily used for this analysis.

Over the past few months, I have figured a new moving average about which you will not have heard anywhere else. This exponential moving average is exceptionally long, but works beautifully on daily and hourly and even shorter time frame charts. The 600 EMA is 3x longer and 3x smoother than our favorite 200 EMA, and if you listen to me, this will soon be your 3x favourite too. You can use the 600EMA label to search my blog for other posts mentioning this magical moving average and deciding the effectiveness of this underrated moving average for yourself. 

Coming to Nifty now. In the chart attached below, the red arrows are clearly marking the resistance which the 600EMA  has posed for Nifty on every rally. The one instance when the 600 EMA was breached was apparently an instance of a fake breakout. The ascending triangle visible on the chart is capped by 600EMA and upward trendline is providing it support. This is a classic ascending triangle. Now this is a continuation pattern. 

The market as I see it now is quite weak. The first support has been touched. A sustained breach of 10770 on closing basis would take the index to 10540 and also mean failure of the pattern which will lay the ground for deeper correction. I am betting on the failure. 

However, if the pattern succeeds, then on the event of a strong upmove above the 10870 level , with a closing on the daily chart , a proper throw back and subsequent continuation should take Nifty up to 11750 again. 

Nifty Hourly chart, captured on 10-01-2019

That is from my side on Nifty. Please do share your outlook on the index and the general direction of the market. I have been bearish since 11700 level. I was bearish at 10600 also and I will continue to be bearish till nifty does not break the 10000 level!

Disclaimer: I am holding a Nifty JAN 10300 Put. 

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Nifty 50: 600EMA poses as major resistance on hourly chart

Hello Readers!

Here is a quick analysis of the hourly chart of Nifty. I'm being honest when I say the short covering rally witnessed in the index in the past three days was nothing less than a shocker. I has been short on Nifty from the 10950 level having spotted the end of Wave B just in time. However (call it complacency) I did not atall look out for a potential support on the chart when the index started falling from 10950 and wiped out nearly 600 points. Having patiently seated out this rally I can see a resistance on the chart. RSI has also has the chance to breath and climb up to the 60 level. The only worrying factor is that RSI crossed the level of 60 yesterday, which is something I was hoping would not happen. 

Irrespective of that I will look at the bigger picture and bet on Nifty going ahead and finishing the Wave C. The chart analysis is attached below.

Please feel free to share your views. You can revert in the comment section of email me kchamaria1993@gmail.com

Nifty50 breaking the floor! Follow up on the successful bear call

Hello Readers!

I previously posted an article  on Nifty50 titled- The Doji is here, and its bear-ly a good news (posted on 30th Nov 2018) wherein I wrote about the reasons why Nifty could turn lower (technical based) and it did!

Therefore, I would like to follow-up on the analysis. 

The below mentioned chart details out the probably support areas, the first one can confidently be said as achieved even before the market opens in the face of the RBI governor's resignation. 

One way the above analysis differs from the previous analysis is the level of the 600EMA. Previously the 600EMA stated a level of around 9754, however it has changed and now stands at 9950. Despite of the support level moving higher we cannot completely discredit the importance of moving averages as important support and resistance zones. 
I would like to go ahead and emphasize that the 600EMA in my opinion is only a potential target level and not the bottom. I strongly believe the correction will go deeper irrespective of the events like election results, President Trump's trade war inflicting policies, OPEC issues getting resolved, currency an interest rate. Interconnected as they all are, the signals of weakness and deep correction have already been given long ago. 

I will not elaborate on this right away. It is better to take one step at a time and go from one level to the next rather than factoring in extreme levels before hand and taking up ill judged positions in the market. 

Few stocks that I have posted about in the past that look good are as follows:

YesBank- https://kavitatechnicalanalyst.blogspot.com/2018/12/yes-bank-giving-strong-technical-signal.html
KPIT- https://kavitatechnicalanalyst.blogspot.com/2018/12/keep-it-moving-kpit-is-set-to-roll.html
Balrampurchini- https://kavitatechnicalanalyst.blogspot.com/2018/11/balramurchini-and-bata-india-stock.html ( I am very eagerly waiting for price to fall to 90 levels so I can reenter) 
Britannia-https://kavitatechnicalanalyst.blogspot.com/2018/10/look-at-britannias-shares-your-evening.html (already run up 15% since the post)

There are a few more names that you will find when you browse through my blog Wishing you luck!

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