Bull therapy 101-thread for technical analysis with the fundamentals

Not very sure, whether we are serving the purpose of the thread. Technical analysis with fundamentals. A chart has no meaning per se and is subject to interpretation. Are the fundamental of safari business backing the chart ?

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Sometimes fundamentals are not obvious
They are not in the financials even
Safari could be rallying due to possibility of ease of lockdown and subsequent higher travel business

When coffee prices were high internationally coffee companies like tata coffee did well but there is a time when the stock is not ready

Coffee issues were first surfacing in April however the stocks are only rallying now

Same with paper board shortages, check the time they were first highlighted and the subsequent rallly of stocks

Recent Steel and yarn are other examples

The reason people are technical is so that they can capture the correct timings and sometimes even insider info

No fundamental analysis will get you that, it’s available to institutional buyers and the only way to get it is to observe technicals

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Hey @edwardlobo - This is very true but I have one reservation on this. I have noticed that the hit rate is relatively low when following just technicals because the market is rampant with manipulation - we end up with a variety of fakeouts both on the upside and downside. To improve odds of juding the direction of move correctly, I believe having a fundamental backing helps - this helps sit through as well in sideways movements when there is favorable upside valuation available. Having a variant perception (what’s changing or what’s about to change in the business) along with the technical setup helps buy even prior to the breakout - something pure TAs would advice against.

We are all trying to improve our odds of success here and that’s the bottomline - when we have better odds, it can let us bet higher - For eg. instead of a 3% or 5% technical position, you can bet a 20% technofunda position or even higher when everything aligns eg. Neuland, Polymed, Thyrocare, Tata Motors, HIL, KNR, Deepak Fert, Thirumalai, Fluorochem etc. (all posted in this thread at some point) had great technical setups backed by phenomenal fundamentals and valuation backing - the funda component helps improve conviction and hence the allocation. There are some where technically it looks good but fundamentals are still a bit dicey - like Bajaj Hindustan or Vodafone Idea for eg. - you tailor allocations accordingly there. This way you are a fundamental, technical and value investor - all at once.

For all you know I might be doing this wrong and there may be a better way, but this has worked for me and helped me stay put with the trend or reduce/sell out when odds of making incremental returns deteriorate (knowing what’s in the price). Also it is easier to fish with any technique when there’s a lot of fish (as in the last year or so) so this is no reason to believe techno-funda is the only way to fish but I believe its the equivalent of angling with a rod, hook, line, sinker and bait - works under most circumstances.

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That’s very true

What I meant to say is that just because a technician doesn’t know the fundamental reasons they shouldn’t shy away from posting a good setup

The safari setup I didn’t like per se as it fails on volume

Most the the companies you mentioned had very very strong fundamentals written on the annual report itself if someone were to read all annual reports, which I do as they are published. Not back to back but atleast the management analysis and directors reports

But fundamentals where the sector itself has changed the fundamentals are hard to gather and read and much harder to time

The two ways are slightly different. One starts with fundamentals and waits for technicals to develop and the other starts with technicals and searches for fundamental reasons

Nothing is right or wrong and in a bull market as you said there are plenty of fish

Almost all technical books I read first and foremost insist that one trade only in the bull market whereas on fundamentals one is a bit brave to be broad market indifferent
Case for fundamentals was Gujarat themis that did wonderfully well in a bear market but I am not sure if the chart setup would not have lost among all the other false charts

When the cycle turns the technicals are usually always the first to catch it. Although fundamentals might be extremely strong the technicals will fail on support points when the market turns from bull to bearish

A fundamentals guy will stick to his guns as he would have fallen in love with the story but a pure technical person will cut short his losses

In theory the pure fundamental person would study macro economics and probably arrive at the same conclusion but the are of study is so vast compared to a study of technicals

In reality any performance is good only if it’s better than the broader market performance otherwise all the study is of zero use. One can simply invest in an index fund. It that is true and you look at something like amibroker and chart relative strength (not rsi), almost all companies that have performed well have zero fundamentals. Look at rajapalayam for instance. It’s outperformed but has zero fundamentals, all it’s fundamentals are based around the sector expecting to do well

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BPCL has formed an ascending triangle pattern. Interestingly, the stock is at the support trendline and it had held the current level of 445 on 15, 16 and 19th July. Now IF it bounces to above 465 levels, it will also confirm a double bottom. Ascending triangle BO will get confirmed above 485-495 levels.

The longer term chart is also interesting here. 250-550 has been a range for 5+ years.

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Bharti Airtel formed a good base around 520 over last 6 months. Few days back, the stock broke out above the green trendline after news on increasing tariffs for corporate plans and entry level pre-paid recharge. This is a clear signal by Airtel that it will not wait for Jio to hike rates. The volumes are higer on up days and lower on down days.

There have been multiple attempts at 590-615 but the stock hasnt been able to cross these levels. It will be interesting to see how this moves.

Discl: I have a trading position. Sharing the charts for educational purpose

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L&T has a classic Cup and Handle pattern on the charts. It broke out above 1600 with decent volumes and now pulled back to retest that level. A similar pattern playing out in SBI Life

Discl: Trading position.

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Syngene Weekly chart . Breakout and retest is completed:

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Technicals:

  1. ANTS pattern seen from 2 July to 19th July.(Ants — Momentum, Volume and Price (MVP) — Indicator by JohnMuchow — TradingView)
  2. Traded in a range for about a week. High volumes on up and negligible volumes on red days
  3. Broke out with high volumes on 28Jul and retested it.

Fundamentals:
Several tailwinds for the company and textile segment in general. Found the below blog post online which summarizes the same

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Manali Petro
Upper circuit today, if not for upper circuit, it probably would have broken through that resistance although volume is still relatively low, I would have liked to see it break with good volume but on upper circuit probably difficult. If it did uc on low volume it means that there is not much supply left…
Some things in its favour:

  1. Capacity being doubled by March 2022
  2. Propylene Glycol Rose 9.34% as per this site in July in what was already rising
    Manali petro I believe are the sole manufactureres of Propylene in India and last 2 quarter results have been spectucalar
    This quarter might do better although current capacity is fully utilised, better price realisation

Daily volume is very thin
Results are expected on 10th august
There will be around 6 months wait for the new capacity to come onboard and with current capacity used up and rising prices, revenue likely to double in 6 months…

disc: holding from current level

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Charts without any description or explanation are not allowed & will be deleted. Repeating the same will be treated as violation of rules & would attract strict disciplinary actions.

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SEAMEC Consolidating after multi year breakout with increasingly large deals

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I have been going through this thread from the start. Arround demonitization time. Demonetization spike was simply the best disapproval of ‘technicals work’ theories. I went through some first 15 posts. Almost every technical analysis failed. Gave up. So dear readers, don’t blindly go by what is being posted here as ‘technical analysis in bull market works’. Please do your own diligence.

Disc: I lost money on pure technicals during demonitization

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@kenshin

I think you are looking at it the wrong way, buddy. Even the best technical setup has a certain chance of failure. Any quantitative method that we use to invest needs a probabilistic mindset, not a binary thinking. Before investing, one needs to set a point where one will have to cut the losses and get out. Otherwise, a small loss will turn into a big one.

Secondly, success or failure of a method can be determined only in a large sample size. Suppose a breakout investing strategy has a success probability has a hit ratio of 70%. That does not mean that if I buy three breakouts, two would turn out into winners. It is equally probable that I may lose money on all three.

Thirdly, position sizing and risk management as well as exit strategy are far more important that our entry point. Though unfortunately, that is not much discussed here.

Lastly, shock events like demonetization, Covid 19, 2008 Lehman crisis etc regularly crop up once in every few years. We need to be psychologically prepared for that. It’s just part of the game.

Good luck…

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One of the member has been suspended for 2 weeks for not heeding to moderators advice. Any chart without proper explanation is going to attract strict disciplinery actions.

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I second devaki.tripathy’s comments

Whether we use fundamental or technical analysis, there is no sure thing. Both involve (buy/sell/position sizing) decision making under uncertainity.
Pure fundamental/value investing takes a view that the market is irrational (Mr Market) and values self assessment of a company over what market is pricing it.

The problem with this approach is that often there are unknown unknowns and information asymmetries not captured in our analysis of a company which can suprise on the downside.Often, assumptions are made about future prospects of the company whose success/failure can alter the assessment of value of a company drastically.
Also, it is not possible to be an expert in many industries. Hence one is limited in the set of company one can invest in.
Even if one is correct in one’s analysis, there is opportunity cost in locking up capital in a company which is not recognized yet by the market

Technical analysis gives great importance to price action. We wont be able to catch the bottom/top of a stock’s long term move, but the idea is to capture the meat of the trend.ATH are a method to identify new trends emerging in stocks/sectors. Breakouts from long bases with volatility contraction help to identify a low risk/high success probability entry into a stock. The disadvantage of this approach is that we may miss out on a large trend in a company/sector if we are too focussed on capturing short term price movements.

Technical analysis allows one to be nimble with respect to market conditions. For outlier events like demonetization, covid etc, stan weinstein’s stage analysis
would have helped to identify change in long term trend and allowed one to exit with minimal loss.
Fundamental analysis helps one estimate the magnitude and duration of a stock’s uptrend so that one can position size accordingly.

At the end of the day, any investing/trading system one employs must have a positive expectancy. In other words we need to make significantly more profits to cover for losses is the ideas that fail.

Personally, being a novice investor (since 2014) experimenting with different approaches, I have had better returns with Technofunda approach than with the value investing approach. Some of the resources that I found useful were:

  1. Mark douglas seminar: Mark Douglas 1 Intro to Trading Psychology - YouTube to understand the statistical perspective to investing that one needs to develop for technical analysis
  2. Mark minervini’s Think and Trade Like a Champion and Trade Your Way to Financial Freedom from Van Thorp for nuts and bolts of a trading system - risk management, position sizing, entry/exit rules etc.
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Bull case for Kalyani Investment Co Ltd
(chart # 6)

It is a holding company like so many others. We know that it is common for holding companies to trade at steep discounts. Here, through charts, I am trying to show that KICL has a lot of catching up to do as compared to its investments/subsidiaries companies. The black horizontal line in each chart is the pre-covid level for these companies. Along the charts I have given Current Market Cap of these companies.
If anything, I expect KICL to reach atleast its previous high made in 2018, as Bharat Forge and Hikal are already above those prices. This is a longer term bet.
Disclosure/Disclaimer: I am not a SEBI registered advisor. I am invested in KICL near cmp.

Update on previous post (chart # 5 - Himat Singka) - what a ride, 200 to 270 within few days.

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Ashoka Buildcon. CMP: Rs. 105.

The Technicals:

It is in the midst of forming a cup with handle pattern (to be completed @ 117 levels) which would give it a target of ~155-160 based on the cup depth.

The Fundamentals:

Ashoka buildcon is an infrastructure company that is mainly involved in the development of roads and buildings. It currently trades at a P/E of 7.7. The recent quarterly results have been better than expected and the order book inflow is healthy (Rs 30 Bn in last quarter, total order book at Rs. 105 Bn), EBITDA margins maintained. Management has guided a revenue growth of 25% in FY 22. And the expectations of closing an outstanding SBI-Macquarie deal this FY would act as a major trigger. On the valuation side of things, taking ~20% topline growth @ FY23 P/E of 8 and subtracting the SBI - Macquarie payable puts this at ~Rs 190 per share.

Disc: I am not a SEBI registered advisor. I have invested recently in Ashoka buildcon.

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Reliance- on a 1 yr long base formation

After reaching a trend climax 2020 july followed by a unsustainable upthrust a month later reliance has been a laggard in every structured portfolio whether investors or mutual funds.
If we carefully observe the price structure- the trading range- the action shows multiple tests of supply- the 2nd secondary test at 1827.45 limit started off a buying spree which thrusted the price back to the resistance of the trading range formed by the buying climax at 2197.80.The action followed down to another test of supply april-may2021 failing to make a new low. The selling was exhausted at a higher price level 1875.45 followed by another buying wave in may.
The next test formed a significant higher low at 2013.10 ( precisely 10% higher than the lowes early in the trading range). An interesting point to note- a resistance at 2086 was formed in November and the action found difficult to sustain above it until 8 months later 2021june.

The repeated supply test not able to go lower than the preceding one- higher low formation- is a classical phenomenon of supply absorption. The 2 rallies we saw so far climaxing at the resistance were backed by good demand bars- indicating the scrip is being bought into strong hands. Finally the general volume inside the trading range has shown a steady decline indicating lesser volatility and lesser exchange of hands. The decline in volume notably started since the buying waves commenced in February after the 2nd secondary test.
The past 2 weeks of action has not shown significant pick up of demand although this week the price has opened above the highs of the previous two. The scrip might be consolidating withtin the trading range for sometime more but this feels like a last point of support building up in the trading range.

Once the base formation is complete reliance can take nifty to higher levels.

With most of the scrips in my portfolio approaching lesser upward potential after the current run up, a higher allocation on large caps like reliance certainly should help with better risk management in my portfolio.

Disclaimer… invested

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One of the high fliers in auto ancillary - RACL, pullback towards trend line and short term support line, Bounceback candidate if stages well. fundamental in main RACL thread.

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