Dear Hiteshji,
How do you view DCB Bank technically and fundamentally ?. It is trading close to the book now and was trading below book value since covid crash. It crossed 200 dma and broke out of down trend at 85-95 range and as you mention ran up much. I can see that it did not grow sales or profits in the past 5 years unlike many other banks.
Do you think much juice left on this counter? I took a small position here considering finance sector stocks are rallying of late.
Thank you so much Hitesh sir for sharing your views on paper stocks.
You have mentioned that there are sectors with better visibility. Assuming you are talking about financials, railways, and defence stocks? Are there any other sectors apart from these?
125-126 was the swing high of DCB Bank during the rally in Dec 2020, immediately after the Covid lows of 58. Now recently stock price have hit swing highs of 138 and seems to be consolidating… My guess is some more consolidation and retest of previous major resistance of 125-126 or thereabouts could happen before another leg of upmove begins… (It can very well move straight up from here too, no one knows movements in short term. )
Fundamentally book value is at 130. Going ahead, stock price will track the growth in the company. The undervaluation rally seems to have run its course.
Dear Hiteshji,
Any view/update on Flurochem right now. It sems to have gone below 200 DMA today. Seems some bulk deal happened today.
Regards
Nikhil
Hiteshji already shared his view on this stock in the post quoted below
Hitesh bhai, picking this up from your last response on Strides.
Since then, it consolidated for some more time and is now trading above the 200dma and 30WMA (which has flatlined) on steadily increasing volumes. And since the fall was one way from 800 levels, at what stage would you think the reversal will be confirmed, and what in your view are the odds of it reclaiming previous swing highs?
Fluorochem has been in a corrective mode ever since it’s q2 results. From the high of above 4100 it has fallen to current levels of around 3250. Now a 20-25% fall from peak is nothing new.
Fundamentally, company has given good results and the tone in q2 fy 23 concall was encouraging. With this 20 percent fall from peak, valuations seem to have become more attractive.
The major reason for the fall had been rumours of promoters selling a small 1-2% stake to take care of pledging and debt issues across group companies. This overhang ended yesterday with massive volumes recorded in the counter. Buyer and seller details will be available once details of block deal are announced.
Technically, 30 WMA is slightly above 3300 and still rising and 200 dema is at 3150. These are important levels to watch.
Strides has formed a long rectangular consolidation since Feb 2022 and is now trying to come out of the consolidation zone. Two important levels on the upside are 360 (crossed but can be retested) and 390. Above these levels, there can be a tradeable rally… But in this kind of patterns, one needs lot of patience to buy on declines and then sit tight.
Hi Hitesh sir
Can we call this chart in Manappuram as cup and handle pattern
Looks like that to me ,I don’t have any chart software ,I just look in screener price chart
Could u please share your view
Thanks
Mahesh
Mannapuram chart on daily chart does look like a cup and handle pattern. Three important pivot levels are 111, 120 , (seems to be convincingly crossed) and 124 (which seems to be providing resistance as of now) But it looks more like a good rounding bottom pattern and a successful pattern playing out could provide target of 225, which is the top from where the fall began. It could be very early days in rounding bottom formation, so there could be some ups and downs within a range, till a firm trend gets established.
Thanks for the nice reply Hitesh sir
Do u mean at 225 rs it will form cup and handle pattern
Did I understand correctly
Also as it’s now getting into diversified nbfc ,what price to book should we value it
Thanks a lot
Mahesh
225 is a target in Manappuram for rounding bottom pattern… May or may not come about. But I have seen it being achieved in some similar early rounding bottom patterns in other stocks. e.g pricol. rounding bottom was formed and an important pivot of around 64 was crossed. Previous peak which was the expected target was at 137. If you look at price now, its at 193. (but not all such patterns play out. One needs to try and figure out where the odds lie by studying fundamentals.) I don’t track Manappuram too closely, so not much idea about it.
Putting up weekly chart of Pricol to illustrate above example. Pivot at 64 marked in solid blue horizontal line. And previous peak marked in dotted blue horizontal line. After the pivot breakout in March 2021, it has been a 3 bagger in nearly 1.5 years.
Recent example of early stage rounding bottom and Pivot crossing in JM Financial is put up in the 52 weeks high thread. Will keep tracking it to see how it plays out.
Dear Hitesh ji, how much value do you put in Relative Strength when taking a buy or sell call? Secondly, in the current market where Nifty 50 is at all time high but the broader markets are not performing which sectors do you find interesting?
I am not too big a fan of indicators. I mainly rely on price and volumes and broader patterns. Only sometimes RSI is useful in finding overbought, oversold, divergences etc. But I do not use it regularly.
Regarding sectors I find interesting, I keep posting charts of stocks I find interesting. Financials as of now seems to be holding pole position. Followed by PSUs, capital goods, defence, railway stocks etc. But regarding market fancy, we have to remember that it tends to change quickly from one sector to another. Since financials is a big sector with a lot of sub sectors and a lot of listed stocks, it offers wider choices to pick stocks. Personally I feel that financials might have a longer run as compared to other sectors with shorter term run ups. With economy reviving post a lot of crises, this could be the sector to watch. Lets see and observe how it plays out.
Dear Hitesh Sir
Thank you very much for enriching us with your knowledge, skills & experience of techno funda investing. I have two queries on stop loss for techno funda or pure technical bets you take positions. Do you follow any particular weekly/daily EMA/SMA like 13/21/30 or do you follow higher stop loss in case of high conviction techno funda bets with higher allocations?
I remember you have mentioned star cement last year. Now, star cement again attained 52 week high with good volume and formed a nice rounding pattern for almost 60 weeks. Seems it has resistance at 140 and 152. Would you consider this as a good techno funda bet to follow? I am grateful for your valuable advice on this counter. Thank you.
Regarding stop losses, in core positions where I have been convinced about the fundamental part also besides the chart, I tend to keep lower stop losses, like say the 30 week moving average. Many a times stock prices tend to go below the 30 WMA but the slope of the moving average is still up and in many of these cases, stock prices make a comeback and resume their uptrend. Its only when the slope of 30 WMA starts going down and stock prices also weaken that we need to worry.
I do not use a specific formula for executing stop losses. I often do partial profit booking at levels I think would provide resistance and if the rally assumes parabolic proportions, sell in lots.
Star Cement has given a good breakout last week. Crucial level was 115-116, which is just below where the stock price closed. (118) There could be some consolidation around these zones ( plus or minus a few rupees) and for those convinced about the company and sector, could be an interesting level to watch. I don’t track it too closely but since you brought it up, the chart looks good. And some of the names in cement space like JK Lakshmi cement have shown very smart moves in last few weeks. So it might be a sector to watch.
Nifty recently cleared its previous all time high of 18600 and hit a swing high of 18887 and immediately next day gapped down to start the short term correction we are witnessing. It left a gap behind at 18778-18771 which is a falling gap and remains unfilled. Whether it assumes any significance needs to be seen.
Nifty started correcting from Oct 2021 from levels of 18600 and made a bottom at 15183 in June 2021, thus taking a time of nearly 8 months from top to bottom. While on the way up, Nifty re-crossed the earlier high in Nov 2022, which is a matter of 6 months. This is a phenomenon of faster retracement. (where the fall is retraced in faster time by the rally)
Nifty rallied almost in a straight line from 7500 in March 2020 to 18600 in Oct 2021 , a rally of 11100 points in a matter of around 1.5 years and was due for a breather. So it went into a corrective mode and formed a sort of broadening triangular consolidation with 3 major falls followed by equally strong rallies. Each fall induced a sense of fear that the rally was over and we were headed for much lower levels again. (Usually this happens due to recency bias, as we all had seen the kind of falls that were there in Covid initial phase) But now if we look at the kind of fall we had in absolute terms from the top of 18600, it did not even fall below the 38.6% retracement level of earlier rally, which signifies inherent strength. So now that we look at the whole correction, it seems more like a time correction, which was needed to digest the earlier breakneck rally, and it took the form of an expanding triangle.
In recent times, bank nifty which is a big constituent of the Nifty has taken leadership, which usually provides more conviction to the rally. On the flip side, the IT pack, (again which has heavy weightage in Nifty ) is dragging the Nifty. And on certain Whatsapp groups I see that a lot of retail investors are still looking out for levels to invest in the sector. This again I think is based on recency bias, because IT sector created a lot of wealth in the prior bull run before running out of steam. But according to my experience, it is a sector that has lost market fancy and would take some time before making a comeback. So in the see saw between strength provided by Bank Nifty and weakness brought on by IT sector, we might see range bound moves in the Nifty, and retest of previous resistances like 18255 and 18338 (previous weekly closes) and 18100 which looks like a significant level on a look at charts.
The interesting part could be the fate of midcaps and small caps. My view is that we might be seeing some kind of strength returning to these names going ahead, and might outperform the Nifty. ( Though this remains a theoretical proposition for me as I do not look too much at comparative charts of small, or mid or large caps)
Overall we have some reasons to believe that we have the foundation of a good rally because of following observations
Above are my views about Nifty. I can very well be wrong because the only consistent rule in the markets is that it follows no rules. ( So inferences drawn based on past observations might still prove to be wrong.)
Attached is weekly line chart to provide clear view of the index without whipsaws. Dotted lines represent the weekly closing levels around which we need to look out for support in the current daily correction. Solid horizontal line is as mentioned before, neckline of the inverted head and shoulders pattern.
Hello HiteshJi,
I have some queries wrt the technical picks and methodology.
Thanks in advance
Regards,
Nikhil
The one instance where I exit my position is when inspite of enough time having elapsed, the stock fails to move and I have other better clear cut opportunity.
I do not have any fixed number of trading positions, or any rules related to it. Broadly I try to restrict my trading positions (all techno funda, very few pure technical) to 50% of my overall portfolio.
Regarding breakouts, your observation is spot on. We are often flooded with breakout ideas, and its often difficult to filter out the best options. I usually look at the kind of consolidation before the breakout, and if there is prolonged sideways movement with volatility contraction, I prefer those breakouts. I also prefer stocks that are in sectoral fancy as its easy to make money in stocks that are in sector in fancy.
I average up in stocks that have moved up only if the fundamental story/results/newsflow inspires confidence. In rest of the picks I tend to stay put with starting allocations. But my problem is that many a times, at the initial entry phase, I am heavily invested and hence allocation wise its difficult for me to add more.
Exit strategies in my stocks is something that is work in progress for me. Its difficult to nail down a specific strategy, that works all the time. So still working on that aspect of investing.
