52 week highs and all time highs strategy

NFL … National fertilisers Ltd chart presents interesting possibilities. The stocks from the sector have had a very good run up in recent months and a lot of them seem to be showing resilience in a topsy turvy market.

NFL chart had a strong run up when it went up from 15 to 74 , nearly 5 times in 14 months beginning March 2020. Since May 21 when it posted swing high of 74, stock went into a corrective mode as marked on the chart by a flag like consolidation. (this is not a typical flag like consolidation but more of a flag shaped correction.) After bottoming out at 41, just above 61.8% retracement level and close to 50% retracement level at 45, (again strong support shown by two previous swing tops which now offered support) stock price rallied and broke above the falling weekly trendline in April and has managed to stay above the trendline in a tight range between 58-65 for four weeks. Many a times, these tight consolidations post any kind of breakout, without suggestion of major weakness is healthy for next move up. This is a sort of platform where one takes a rest after climbing a big number of steps and once we regain strength and breath, we are ready to climb next set of stairs at a fast clip.

On the weekly chart, close to 15-17 stock price has made two important bottoms in 2013 and 2020. The intervening peak was at 89.5. (90 for a rounded figure)… Now after breakout from falling trendline if stock prcie manages to take out its swing high of 74 and cross 90, it will have completed a double bottom long term W type of breakout and post that target can be 155.

The trade set up equation at current juncture I have made for myself is buy at around current level of 60, with a stop loss of 54 (200 dema which is climbing up day by day) and aim for targets of 90 and 155 over medium to long term. The only drawback with these kind of trade set ups is we are not too sure how long these sideways consolidations are going to last. (range of 57-65) …

12 Likes

Sir -I am a big fan of your understandings of the market.Learning a lot from your insights over last few years.

Have done the analysis of NFL wrt EW and Stage Analysis methods.

Here are my views

As per EW

We completed Wave 1 & 2 - Wave 1 started from March 2020 lows and ended in May 21 near 73. Wave 2 ( downward ) ended in Feb 22.

After that we have started a new wave- the bigger WAVE 3. We completed wave i & are now in wave ii of Wave 3 .As oon as wave ii ends, now we’d start the wave iii of Wave 3.

Wave 3 happen to be fast and with in Wave 3 , fractal iii is more faster.

As if now, we are near to start that fractal . Now whether it starts or not, would also depend upon overall market sentiment. Sometimes wave ii can take longer period.

In shorter term, we have resistances at 63, 68 and 73 ( 52 week high)

On longer term ,the target comes near to 200 ( equality rule - assuming wave 3 would be equal to wave 1) . But it may or may not be achieved as we have strong resistance at 145 .

As per Stage Analysis

Yes , we are in Stage 2, a stage where stocks tend to be on upside move. Volumes of last few weeks have been good.

The only issue is lack of volatility contraction in last 10 months.

Would like to see more of that (volatility contraction). May be the current overall bearish sentiment would help in building that narrow volatility contraction in next few days/weeks.

My Buying Startegy

Looking at all the above points, I will like to wait till it breaks its ATH (74) and retests ie. when it crosses its all left side recent resistances.

I happen to believe in Buy High, Sell High strategy. Once I ave clear indication that now stock is ready for the longer journey . Cna pay 10-15% more when I am sure of getting 100% gains rather than getting my limited capital stuck in waiting for Godot.

8 Likes

Easy Trip:-

Price was consolidated for around 6 months in the range of 240-310 then gave a clean break-out after forming another small base.Now its forming a flag pattern.

Stock is consolidating tightly when the general market is negative which indicates accumulation so a small buyer demand can push the price up. Sector tailwinds are there as an unlock theme

3 Likes

Dixon tech was a big winner in the post Corona rally. Stock price went up from levels of around 600 to 6000 plus, a 10 X within a time period of 1.5 years or so. In the process its PE went up from 35-40 to a high of 180 at one point of time. (screener data). And even closer to the tops, a lot of analysts and investors were gung ho citing huge opportunity size in the segment the company operates in. i.e manufacturing of outsourced electronics and household products. But then trees cannot grow to the sky. Stratospheric valuations can sustain only as long as numbers last. Narratives can take a stock price only so far before reality catches up.

The chart has now formed a head and shoulders breakdown. Downside targets are quite alarming. While the targets may or may not get achieved, those wanting to buy should be greedy for price and or time correction. (disc: no positions)

20 Likes

Stock has swiftly retraced from 640s in early March to 440s… could you update your technical analysis

Sir -your observation is correct.

Downfall is sure but it may follow an alternate path.

IIt has fallen in 5 wave in A, now it can take a bounceback in B wave ( alongwith Nasdaq B wave bounce ) - levels to watch 4196/4590 - and then a downslide in C wave ( again with Nasdaq.

So I will wait for B wave bounceback and start of decline in C wave I want to go short . Targets if downside look amazing ( 2700) - if that happens.

Disclaimer- Chart for study purpose only, no reco.

3 Likes

Capture

just a question on technical pattern …can we see this pattern in manappuram as a cup and handle… ?

RBL Bank last week came out with good results and management commentary indicates 20% CAGR growth for next 3 years. Book value is 211. Net NPA has come down. Stock is availabe at 0.55 times book.

The chart presents an interesting pattern where stock price formed a double bottom at levels of 100-101. Weekly low this week was 100.55. April 2020 weekly low was 101.55. Effectively we have a double bottom of 100-102. The intervening top lies at 274. Another resistance is at 158-165 where there was a weekly falling gap, marked in dotted horizontal lines.

If the current low holds and stock price starts moving up, and if performance matches the management commentary, there can be a hypothetical situation where if stock price crosses 274 during next few quarters, double bottom will be confirmed and stock price target could be 447.

Putting in simple calculations, if two years down the line performance matches commentary and there is profitable growth, book value could move up. And if there is some fancy for these kind of private banks, there can be rerating and banks like RBL can easily quote at 2 times book, providing targets close to what technicals indicate.

As of now markets seem to be on a slippery slope and its difficult to take a long term call, but with good quarterly results and good chart pattern it shows an interesting techno funda combination. (hammer candlestick pattern at a double bottom level. ) (disc: invested)

18 Likes

Dynemic Products was the favorite of HNIs and other chemical sector experts. It has a classical chart depicting Minervini staging. Shown at the bottom of the chart marked by dotted lines is the stage 1 consolidation below the lower horizontal dotted line, below 163. Once the stock price broke out above this level it started its Stage 2 upmove. (usually the most rewarding in shortest period of time) and soon crossed previous peak zone of 221 (higher horizontal dotted line) and kept going up in a sharp upmove, propelled by the chemical stock bull run and posted high of around 700. (exact high and other levels will differ slightly as GMMA chart is based on moving avgs and does not capture exact top or bottom or absolute values). Post that it seems to have gone into Stage 3 distribution which lasted from Oct 21 to April 22. And recently it broke below the distribution zone below around 520-530 and is trying to hold on.

Fundamentally the bet here is on the big capex incurred by the company. The first warning for me was the big cost overruns in the capex. And since past few quarters, the hope is that capex will start showing growth in sales and profits. And all this while with negligible growth in profits, the stock price still fetches a PE of around 25. Company also announced rights issue some time back.

The more interesting thing to watch here would be what kind of price action we can see after a Stage 3 breakdown. I have put up this chart as it contains a Stage 2 breakout on upside and now a Stage 3 breakdown which could lead to a Stage 4 fall. It is as close to a live example of Stage 3 breakdown as we can get. Hence academically interesting.

7 Likes

Privi speciality chem is an example of what could happen in a stock which breaks down from a Stage 3 distribution. As shown in the chart attached, 1760 (horizonal dotted line ) was the major breakdown from a Stage 3 distribution. And post that a major support was supposed to be around 1570-1580 (solid horizontal line) , but the force of these breakdowns is such that these kind of supports hold no meaning. After breaching the key level of 1760, stock price fell to a low of 1076 before a minor pullback. Nearly a 40% cut within a matter of only 4-5 days.

3 Likes