Most of the financials and for that matter a lot of the breakout stocks in overall market are in pause/consolidation mode post the breakouts. For breakouts to suceed, we need strong markets and that’s what is missing. So we have only those stocks moving where the element of positive surprise is overwhelming. In all other places its range bound moves. Wherever results are along expected lines or are decent enough, stocks stay steady and wherever results are below expectations, there is a brutal onslaught and stocks correct sharply.
This type of market behaviour is also a phase in market journey and can go on for more time than we expect. But the good thing about the type of market we have currently is that it gives us a good chance to look at quarterly results, listen to concalls whereever poossible and make informed choices.
NBFCs after their run up are in consolidation mode and might remain so for some more time. But we should not be too hasty to jump the gun and buy breakouts immediately because invariably these days in most breakouts, there is a pullback move and that could be an opportunity that can be used prudently.
Policybazaar has made a higher top after a long long time… It crossed recent swing top of 500. Going ahead, we need to observe whether levels of 495-500 which is an important pivot now acts as support on declines.
Its too early to call a change in trend, but first signs of that happening seem to be visible. It has traded below 500 since Sep 2022 and after nearly 5 months has managed to go above 500 and stay above that level. So fingers crossed.
Your thoughts on pharma industry right now?A year ago you had looked at the chart of Manaksia ltd.Now manaksia has doubled in price.Were you talking about a trendline/pattern for months.
I do not track pharma industry closely now. But some of the charts are showing early signs of reversal, though not clear cut indications.
Manaksia played out the pattern wherein stock price breakout of significant resistances, go up and come down to retest the breakout zone and then go up to post much higher levels. Hope you latched on to it and made good money. I did not.
Hello Hitesh bhai
Thanks for always sharing your insightful views.
1 Whats your view on auto sector, whether the run would continue after the long pause that its taking or does that signal cycle reversal ? Auto cycle took off after a long time, so can it sustain for some time like pharma did as sectors that breakoff after a long time do ? Or is it that cycles have become shorter now ?
2 Also whats your view on Eicher motors that it has corrected significantly now ?
Many thanks
I think auto sector rally is taking a well deserved brief pause. Most of the stronger stocks have had a strong rally and post that some pause is expected and is in fact good for the health of the rally. But most of the low hanging fruits have been plucked and hence anyone wanting to join the party now needs to have one foot closer to the exit door. Idea should be to continue to monitor monthly sales figures and see how momentum is going, and take an appropriate call.
Eicher motors has corrected from highs of 3800 to current levels of 3200-3300 which in percentage terms is just 20% correction from peak. It is close to previous all time high of 3350 and retesting the 200 dema. So overall looks a good risk reward equation.
In cyclicals and turnarounds and smaller companies, maximum money is made when subtle changes in business models or business environment are picked up as early as possible. This will often entail some amount of heartache when you see your stocks languishing while other more fancied stocks keep going up. But once a strong trend sets in, returns are often good. For technical analysis guys, it should be an attempt to catch early stage bottoming formations like early stage rounding bottom, or double/triple bottoms or some appropriate candle stick patterns on weekly or monthly charts, or such reversal patterns.
You can have a look at IT sector stocks wherein a lot of stocks are coming out of double bottom or some other bullish reversal patterns. This happening after stocks nearly corrected 50 to 61.8% of their earlier retracements. Fundamentally too it should be easy to do some basic research on these stocks as most of them give detailed presentations, do concalls etc…
Hiteshji, wanted to know if you’re still tracking hotel stocks… Kamat Hotels which had mentioned earlier zoomed to 130 and seems to be resting now… other hotel stalwarts Lemon Tree, EIH are languishing despite cracking results… from your earlier posts, I infer patience is the key in these markets… wanted to pick your mind on this…
Hotel stocks like most other sector stocks are in a sideways to down range. Since market does not have a strong trend, sectoral rallies are also faltering.
Coming specifically to hotel sector, most of the hotel companies have had very good quarterly results and prospects of good quarters going ahead are also strong. So they could be headed for good times in terms of results and balance sheet improvements.
Strongest stocks in the hotel sector (from among those I see off and on) are Indian hotels and Kamat hotels. As of now I don’t have any position in any hotel stock.
Good Evening Hitesh bhai. With markets showing signs of consolidation and sharp falls on few days. How do you look at approaching stocks in such markets. Growth stocks at high valuations can correct for no reason . Some P/E rerating on downside happening as markets normalise from fancy of 2020/2021 one way momentum.
My question- which pockets of sector or stocks you look at . Most of them have been sideways movement .
Strong sector like Industrial / cap goods. First leg of rally has played out.
With markets not showing any strength, its a difficult thing to see your stocks continue to go up consistently. The ocassional rally in most stocks tends to fizzle out in a day or two, and even if they may not fall to pre rally levels, they do end up correcting a fair bit. Now its up to us how to take this situation. I prefer to find opportunities in such environments. We have many companies that have posted superb results and management commentary too has been bullish for near to medium term. Such companies offer a good hunting ground to uncover the next set of winners.
From among companies I own, HBL has given a detailed presentation for the first time in its history about its business segments, and within that, what kind of growth management expects going ahead. They have also provided topline and EBIDTA numbers for fy 24 and fy 25. I think the more important thing is that for the first time management has come out and given out information and their projections in the public domain. While numbers may or may not be achieved or exceeded, we can clearly track the high growth segments to see how things are panning out.
Usha Martin is playing out as expected. Results have been very good and along expected lines. A couple of days back, the stock price suddenly corrected to below 170 and there was a lot of supply at 168. If we have done our homework and are convinced about the story, buying in such panics will become easy and this can provide good entry points. Yesterday, the very next day, stock price shot up to cover all the weakness of previous day. We will find many such situations till the markets remain weak/sideways.
Many other stocks have been discussed off and on and VP colloborators corner write ups are a very good short cut to get an idea about the company and its prospects.
Among the sectors, when markets are weak, most sectors tend to weaken, but those that keep holding key levels, like say staying above 200 dema or 30 WEMA are the ones to look at if you follow technicals. Fundamentals I already talked about companies having good results and good commentary. As of now I cannot see any sector that is showing clear cut strength.
First of all wanted to thank you for how diligently and generously you keep sharing information, experience and views on this thread. VP is beautiful because of generous contributors like you.
I wanted to ask, how does one track sectoral strnegth/weakness on charts? For sectors that have indices such as Bank Nifty, its easy to do via the corresponding chart. But say I want to track strength in a sub segment such as Housing Loan NBFCs or CGD companies, is there any alternative to tracking individual stock charts of that sub segment?
A broader question is, what is your modus operandi for tracking broader market strength / weakness and sectoral trends? What tools do you use and at what frequency do you scan? I am sure we’ll learn a lot if you don’t mind expanding on your process in this regard
Thanks again for being such a cool and sincere contributor, have learnt a lot just reading your posts.
Hi apologise for butting in… As per tracking sub sectors I have found Tijori Finance quite useful, they have a detailed breakdown of sectors i.e. Pharma and API are tracked separately.
Thank you for all the time you take to answer everyones questions.
I have observed in many small mid caps companies charts RSI divergence happening and this is actually first time for me to see this happening in so many stocks. How would one read this according to you ? I have attached some reference charts and marked the divergence: -
I am not an expert at using screens or scanning sectors using some tools. But being a market observer, I am usually clued into a lot of stocks. In the terminal I use I often put up a variety of stocks in the watchlist and I have two windows within my watchlist each with nearly 30-40 stocks which I have shortlisted because of their various patterns or any other bullish observations I may have had.
I am in some investor whatsapp groups both fundamental and technical, where there are a continuous stream of recommendations and opinions. If you know how to avoid noise in these groups, this also can be a good source of ideas to work with. And a lot of friends keep sharing ideas with me.
Being flush with ideas, the first thing I do is to look at the charts of these companies and if I find that there is some kind of uptrend, or consolidation or something else I like, I put details in an excel sheet I maintain for my records. This is usually month by month. Once I scan these charts off and on, I often get a sense of where the strength lies in a particular sector.
I have not used tijori finance, but @Akashdeep has provided a useful tool to use to figure out where the relative strengh is.
So in effect, there are various ways to bell a cat and we can pick and choose what suits us.
For positional trading for purpose of delivery based investing/trading, the best time frame to use is weekly charts. So idea should be to keep on the look out for any reversal signs on weekly time frame charts. These reversal signs can take the form of sideways consolidation, triangular bottom formation, double bottom formation, etc and in conjunction with these, if there are other adjunctive evidences like say positive divergence it helps in taking an informed call.
The other important thing to look out for is to see where the reversal is happening by looking at the overall chart on a longer term time frame. If these reversals are seen at strong support zones/Fibonacci levels etc then they assume even more importance. e.g You can see charts of most IT companies which have shown consolidation at 61.8% retracement levels to their previous breakneck rallies. In many instances there are sideways range bound consollidations for nearly 6-8 months before stocks break out, and there too because of market weakness, there are failed breakouts and stocks go back into consolidation zones.
The examples you have put up are good examples for someone to learn what positive divergence is. But this should not be the only indicator you use while deciding on reversal pattern. Try to use the price and volume in association with RSI divergences etc.
As an example, try to look at the weekly chart of Nykaa. There is classic positive divergence on weekly charts. That only means it should be on our watchlist and we don’t need to jump right in now…
RSI divergences on daily charts can give small movement- and once the price comes to starting point of divergence ,it would again start following the main trend.For little larger movements of price, one should focus on divergences on weekly charts.
Never use any singal indicator in isolation.It should always be combined with few more indicators.For example. there are huge Moving Averages resistances on Borosil chart posted by you .More the overhead-resistances , lower level -supports, more difficult for the price to move in that direction.
Example - where looking purely at RSI divergence would not have helped .
Sequent Sceientific-Weekly Chart
Prices are falling but there is no corresponding level of fall in RSI.
One should check the overall mid term mkt trend (Nifty/ Mid /Small cap in our case) and an eye on mid term macros/ Demand supply scenerios/ Smart money flow
Then one should check the mid term trend of the sector in which particular stock falls and sector demand/supply macro
Then One should 1st identify the mid term trend of individual stock charts on a very longer duration in all time frames (monthly, Weekly, Daily in that order) and a basic understanding of Headwinds / Tailwinds of stock of interest
All 3 above should be observed in view of Dow Theory
Mid term uptrend : HH HL
Mid term downtrend : LH LL
Then decide is it actually a mid term trend reversal or just a LH formation due to RSI divergence / xyz indication
Then decide ur stock commitment accirdingly
Very short term trade of 1~2 days
Swing trade of few days/ week for 15~25% return
Positional trade of few months for 50~100% return
Mid term trade for 1~1.5 year for multibagger return
Now coming to the points of ur stocks, mostly they exhibit short term spikes for making LH as the major mid term trend is still down.
Timing them and actually executing them is very difficult bec now overall mkt is in sideways/bear trajactory.
If you r not fast enough to encash bear rally (LH) , you will definetly get stuck as risk reward is not good. All depends on ur individual timing/ fast execution.
As a thumb rule, personally i avoid bear rally (LH) in a mid term down trend of a stock.
My approach is just reverse, to try to enter at (HL) in a mid term uptrend and then try to do pyramid with strict SL in case mid term trend changes/chart become bad due to overall mkt / macro condition.
Overall thought process should be to protect capital when overall mkt / sector does not support and be aggressive when the tide turn favourable (again by looking at longer duration charts of major mkt index/sectorial index on weekly/monthly chart).
Do you have any views on Titagarh Wagons?Its a golden period for railway companies as government is seriously focusing on building infrastructure (both freight and passenger).
Titagarh has been named as L2 for 200 Vande Bharat trains order which is worth 15,000crs for them. Its a big win for them. They are also ramping up wagons capacity to 700 per month.
Technically the stock has given multi year BO at 200 but facing stiff resistance at 230-235 levels.
