ValuePickr Forum

Contrarian investing using technical analysis

@Mehnazfatima ji and others

I am very new to technical analysis but very much believe that its essential along with fundamentals for picking the right stocks. ICICI Bank seems to be forming a bullish divergence. Is this correct?

Sunil Healthcare is forming a nice rounding bottom on weekly charts. With the current state of Pharma sector, can this stock prove to be a contrarian bet?

I saw a couple of hammers in there. You may want to look the daily and see whether any triangles and trendlines have been broken.

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Sir could u and @mehnazfatima share with us ur some of ur trading setups , rules ,hou to identify stocks for trading

Sir means @bheeshma
Also request others to share and participate

request you to not call me sir :slight_smile:

I have read the following thread from top to bottom many times and you can find some good setups here.

Also you can read the old posts on TED. Many of our seniors post/posted there and you will find a wealth of info on technical setups.

I found the found Technical Analysis: The Complete Resource for Financial Market Technicians by Charles D. Kirkpatrick and Julie R. Dahlquist also very informative.

Also request you to go through the following post of mine :slight_smile:

Also ta can to some extent predict turning points but struggles with how far prices can go up or down. Considering thats where most of the money is made its difficult to classify ta as an investment tool.

I saw a movie called scully some weeks back and its a great analogy. Tom hanks is the pilot of a plane whose engine catches fire and he lands the plane sucessfully in the river saving everyone but the computer simulations say that he could have landed the plane safely on the airport. After a long drawn out case he proves all the computer simulations wrong. Human judgement about a company cannot be replaced with lines on a chart. They are there in case u want inputs.

Best of luck @Divyanshu_Taneja!

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@bheeshma sir what are the ways, or idea through which we can identify on daily charts that today candle will going to be green or red, how to identify the colour of candle for upcoming day, ways other than candle stick pattern ,for day trading

If i knew that i would have retired already

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One of the lesser talked about stocks which previously was an investor darling has formed an interesting pattern. Hawkins cup and handle pattern on daily charts. Only problem with hawkins is that its a very illiquid stock and hence any whipsaw can take a weak hearted investor out of the position if he has one. disc: invested some time back around 2850 levels with 8% allocation. Thesis was that inspite of demonetisation company managed to avoid degrowth which is something which really attracted my attention. Valuationwise although its never cheap, its not very expensive if compared to its own historical valuations. Decent cash flows and dividend yield.

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Isn’t Cup and Handle valid only on an uptrend? Here the beginning of the cup around November was on a downtrend. Is this still valid?

It has been described by different authors as reversal as well as continuation pattern. So applies to both trend reversal and continuation.

Hiteshbhai

I wanted to ask you why you invested at 2850 levels ? Was it because of the break of the minor downtrend on 14 march?

Sincerely
Bheeshma

Hitesh sir what could be the possible upside in hawkins

@bheeshma, I had bought hawkins based on its q3 fy 17 results which I found were good inspite of demonetisation. The pattern in fact developed later.

@zulfi, Pattern target are close to 3400 but I would like to review this company more on fundamentals.

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FINDING LONG TERM BOTTOMS IN STOCKS USING CHARTS

Since most people on this site are looking for good value buys, I thought I will throw my hat in the ring of how one can find some candidates making a bottom using technical analysis.
Over the last several decades that I have been practicing TA, I have created my own method of mapping a bottom. There is no right or wrong way. This is just my way. It works for me, so i am presenting it for serious members here. It is a longish post so exercise some patience as you read.
The bottoming process on a chart has to go thru the following steps. This entire process takes anything from 5-10 years. Use Weekly candle charts, with Vol, Rsi and Adx indicators added.

  1. Stock will be into a long decline- a few years.
  2. After hitting a bottom, the stock then begins a phase consolidation i.e. sideways movement- lasting another year or two.
  3. It may make a new low during this phase but the Divergence patterns on the momentum indicators (use RSI or Ultimate Osc- those show the divergence pattern the best) will begin to appear.
  4. Then we will get a sharp ‘bear market rally’. The prices will rise (most of the time as a nice 3-wave advance, on good volumes. This is created by early value hunters and perhaps some localised news.
  5. Such a rally will be fooler and is subsequently retraced fully, with prices falling even to new lows.
  6. A tell-tale sign that the rally will not last is given by the DI lines which will not maintain the bullish dominance (+DI remaining above -DI) and quickly surrender it.
  7. The new low (or perhaps a double bottom) will be made on high volumes (sometimes climax volumes may also be seen).
  8. Candle patterns of reversal begin to appear at such stage as the seeds of the new bull market are sown here.
  9. Another rally will now occur, not as large as the previous one (point 4) but this will start wearing better momentum characteristics.
  10. Prices will decline yet again, but will now start making higher bottoms (seldom more than two). During such pullbacks- part of the new rise- the RSI will show the classic Range Shift signal. This is one of the keys.
  11. During the fall the ADX line will mostly record a new low as well. But the DI lines will NOT cede control or will regain it very quickly. This is another key element of the turn.
  12. A new rally will emerge after the higher bottom retest and the range shift and this will be on higher volumes and the RSI will hit new highs.
  13. By now bullish patterns will start showing up on the charts ( traditional H&S or Rounding or some such OR candle patterns on Monthly or Quarterly charts).
  14. News flow will start turning much better and certain positive events will begin to occur.
    This is the beginning of the rebuilding phase. In 7 of 10 cases, the stock never looks back.
    As an example, check out Rel Capital, IB Real, Suzlon etc with the above pointers.
    Thanks for reading. Happy bottom fishing!
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Good to see that you are in here. I too had the same feeling. Flat growth in that quarter should be considered a great result. Even the bottom line was up big. I bought it treating it as an Fixed deposit.
If you compare to other consumer brands, it looks reasonably ok. And the peer TTK is at 67 PE. One thing I noticed is that TTK never gets punished despite the bad results. This has been happening for several years now.

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A very comprehensive discussion on bottom formation process…combines different indicators too…like RSI range shifts…ADX…etc.

I am glad that I too use many of the above steps in bottom formation stocks…and I am particularly glad about the fact that you have pointed out Suzlon as a bottom formation candidate. I am hugely invested in Suzlon…(as already disclosed earlier)

In December 2016…quarterly, monthly and weekly RSI…all found support around 40…that sort of convinced me that Suzlon is entering a bull market…or atleast coming out of a bear market…

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Do you also have a method to look for possible upside targets in such turnaround situations? Thanks.

Since we are looking at long term lows stocks with this approach, it is obvious that the gains also will acrrue ovre a longer time frame. This means that the moves will go in stages. The first stage will be a move that is usually a 2x multiple of the size of the range near the bottom. That will set up the first impulse higher. Subsequent measures should be multiples of the first impulse. You can start with a 1.618 multiple of that first move. Alongside, you can also do retracement measures from the previous swing highs created during the decline. Those will set up additional targets that you can combine with the projection targets you use with the multiples of the first rise.
The move evolves thru time so you may have to keep recalculating every few months, after every big reaction.
Hope this helps.

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Presentation on Technical analysis which I did at investor meet…Some contrarian approach which I use with Fundamentals has been discussed as well…

Technical analysis_Basics_v2.pdf (1.2 MB)

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