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.
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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.
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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?
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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.
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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.
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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
- Faster retracement of entire fall by current rally.
- Nifty retraced less than 38.1 % of previous rally, which indicates routine correction.
- An inverted head and shoulders breakout in Nifty weekly chart is marked and its neckline is marked by solid blue horizontal line and its targets are well above 20000 for the nifty even if we consider bar chart or line chart.
- There is no froth visible this time on crossing earlier highs. And there is some skepticism about the rally.
- Market leadership taken up by a strong sector which has a lot of weightage in Nifty.
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.
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Hello HiteshJi,
I have some queries wrt the technical picks and methodology.
- Do you keep a time stop also for the technical stock picks? After the breakout if the stock does not move and is consolidating for some time (4-6 weeks or more), do you get out of those patterns?
- How many trading positions do you generally hold at any given point of time?
- You may be coming across many picks/breakouts on regular basis. How do you differentiate between OK, Good and the Best picks? Somehow I am not able to decipher that out of the 20-30-40 stocks which 5-10 may be the best picks and hence playing a “wide spray” theme.
- Do you average up for your technical/techno funda stocks? I have generally observed that if I am averaging upwards in reasonable quantities, then as the stock corrects, I kind of lose all the gains and move back to losses. How do you avoid that?
Thanks in advance
Regards,
Nikhil
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- Time stop depends upon the kind of time frame I have decided at the time of entry. If my entry is based on weekly time frame, I would give the stock a time of few weeks atleast to move. Because many a times, after a successful breakout, there are a lot of tests and re tests of breakout levels and these things take time. And after such to and fro moves, stocks finally give the expected moves. To give a recent example, KRBL had a very good 3 year high breakout above 340. It then crossed 400 and went into sideways consolidation between 375-415 for six weeks and finally went above that range to hit swing high of 435. Post that it has again started a short term correction and closed at 405 which is within earlier trading range. So going ahead, I can either book profits/partial profits, or tighten my stop loss to levels of around 370, slightly below the earlier trading range. Time wise, it might not be too easy to put a stop as this breakout was a 3 year high and I have to give it atleast a few months to reach target.
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.
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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.
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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.
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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.
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Hi Hitesh Bhai, wanted to know your thoughts on holding long-term stocks (consistent compounders, testing patience for a few years in between):
Context is that I’ve been holding HDFC Bank and Kotak Bank for 2+ years now (~10% of PF at cost), but returns have been negligible.
My rationale was to have 2 strong, consistent businesses in PF that can give 13-15% returns YoY over a long period of time, but I’ve been thinking about my opportunity cost lately.
Any advice/ any thoughts on the two stocks?
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If you are holding stocks for long term, ( I assume it means 5 to 10 years) then it does not matter if stocks do not move much within a year or two. And specifically HDFC bank and Kotak bank are two of the best managed private banks with huge size benefits. So my guess is its only a matter of time before they start generating returns.
I think you should try and understand and define yourself as an investor, which slot you fit in. If you think its long term as described above, then its okay to be in the situation you are in. But if you have the left out feeling ( as a lot of cats and dogs are running hard) then its a different proposition.
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Hitesh bhai one quick question on how can one average down on a fundamentally good stock where one has a conviction.
For eg Gujarat flurochemicals have corrected from 4000 odd levels to 3100 .
How does one decide on price where one can average a stock where one has conviction.
I generally prefer average on way up but in certain cases where markets gives good opportunity it does make sense.
Your view would be helpful to understand how to decide price point.
Support levels can be one but sometimes they keep breaking .
Or is it wise to average once stock has made the bootom and started to bounce back ?
In such case you may buy at 5-10 % higher than bottom but chances of bottom being broken again remains less of a chance.
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Dear Hitesh ji, let me take the opportunity to mention how extremely valuable and helpful your insights and knowledge are that you give freely. Thank you.
How do you screen for opportunities and stocks? Do you use any online tools? Are there any specific parameters for screening? Thanks in advance.
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As seen by recent example of Fluorochem, even fundamentally good stocks tend to correct and break expected support levels. Many a times its simply an equation of demand and supply, other times more than meets the eye.
I prefer to buy stocks in above situation once I see signs of strong price reversal. As long as the stock continues to make lower lows and lower highs on daily charts, its difficult to take a call about buying. We do not know how low the stock is going to fall, so its better to wait and be patient before buying even though as you mentioned, its 5-10% higher than bottom. I would even be okay after stock has moved 15-20% higher form bottom. Atleast we need to be sure that a bottom is in place, so that there is confidence while buying.
If I am holding a stock which breaks crucial support, and if I have heavy allocation, inspite of decent fundamentals, I tend to reduce my position to comfortable levels. And once I find uptrend has resumed, I start re loading again. This strategy is not fitting for a pure fundamental investor, but I find it suitable to my style.
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I usually keep looking at charts on a regular basis and keep a note of any observations I have regarding that stock in an excel sheet. And then I tend to revisit it and see if anything has played out or not.
Fundamentally I have a list of stocks from sectors in strong uptrend and I keep tabs on them for results, any newsflows related to them etc…
A combination of the above two keeps me supplied with a lot of potential candidates. Good chart pattern in a fundamentally good company in a sector with fundamental tailwinds, and or market fancy is usually the holy grail of finding a good investment candidate.
The other source of stock ideas is the wide group of investor friends with whom I keep exchanging ideas.
Problem these days is about rejecting ideas, as there are almost always too many of them.
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hello hitesh sir , hope you doing well , in this type of scenerio as a retail investor , how do invest money , which is positive (avg up) or is negative (avg down), thanks in advance .
Hitesh Bhai
how do you deal with the situation of the present kind where all supports of stocks with good fundamentals are broken on account of overall panic in the market. Do you cut some losses, be in cash, and wait for momentum to pick up to make an entry or bear the pain.
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I think the underlying query for both questions is what to do in the current market scenario. Whether to buy stocks, stay put and keep holding fort, or go for outperformers, or stay put in whatever you hold, so on and so forth.
I think this whole mental exercise can be broken down into simpler tasks. First is if you are invested fully in sound companies, with good prospects, it makes sense to do nothing, Try to keep yourself updated with newsflow, try reading books from pending list, or if you want to take a break from it all, take a vacation.
For those with cash on hand, its simple. Make a list of stocks to buy by doing appropriate homework, and then let the stock prices and market settle and then take a call to buy. Or if you can figure out attractive levels to enter, based on either fundamental analysis or technical analysis, then try buying in small lots and test the waters.
I am now used to these kind of corrections, having seen them multiple times. Only problem is that its difficult to foresee them and predict correctly. So having a strategy to deal with these market volatility is important. I usually have a focus group of stocks, some of which I am invested in and some which are in my wishlist. Many a times, it happens that in situations like the current ones, tweaking the portfolio becomes easy as most stocks fall to various extents and there are often great bargains on the market. So one has to have the courage to rebalance the portfolio. But in my experience, even if nothing is done, if the company in question continues to perform and deliver good results, ultimately prices tend to track earnings. So the only thing needed with these companies is to nurture them through tough times and maintain our own sanity.
Technically, on nifty, the level of 18000-18100 was appearing to be a good support. But once that broke, the fall was very swift and next level to watch out for was 17800. Today that level was tested. We need to see how next few days pan out. Next level to watch out for is 17600 which is 61.8% retracement of entire rise from 16700 to nearly 18900. While the 200 dema is placed at 17435. However with the kind of correction and panic we are seeing, no levels are sacrosanct.
In market corrections, if one has to panic, it has to be very early on. And that’s a difficult thing to do because most sharp corrections begin with mild corrections and then acquire ferocity, almost like a storm. But as with most situations, the one sentence that keeps one going is "this too shall pass. " Thankfully these days, the corrections and subsequent rallies are quite short lived, so times change quickly.
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