Mapping Markets

Price Is Everything

Infosys: Q3 Numbers Out ! What Now ?

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This stock has been an outperformer since August 2011. The third quarter numbers are out today and there is a lot of opinion floating around about valuation and where price could head.

Let’s take an objective look. Let’s repeat the exercise of identifying buyers / sellers. Have a look at the daily chart featured below.

Hope you notice where the rally off the August 2011 low was arrested. This run-up was halted right at the prior gap and the price is still traded below the July 8, 2011 swing high of Rs.3,024.

While this rally from August low is impressive, there is nothing to suggest that the major sellers at Rs.3,024 have been overwhelmed.

The last set of buyers were apparent near the Rs.2,400-2,530 range. As a trader, I would look for evidence of buying near Rs.2500, for initiating longs.

There are potential short trades, but the best short entry may be behind us. The logical stop loss for short trades should be at Rs.3,030 or at least at Rs.2,980.

Hindalco: Where are the Buyers / Sellers ?

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As a trader, identifying where the buyers and sellers are likely to be interested could make a huge positive difference to your trading account.

Once you identify buyers / sellers, you can use pick-and-choose any tool / indicator / astrology to take trading positions. So, take some time to identify where buyers / sellers are stacked up. Be my guest as I try to do this exercise in the daily chart featured below.

From the chart, it’s apparent that the buyers are keen to defend the Rs.113-120 range. Pay attention to the yesterday’s huge breakout bar, which suggests sellers at Rs.119 have been overwhelmed.

The next bunch of sellers are likely to be around the Rs.130-level. How you want to design a trading strategy is a question of personal preference. You can go long on dips, for a rally to Rs.130 or Hunt shorts near Rs.130 or buy a breakout above Rs.130.

Personally, I would prefer to buy the dip for an initial target of Rs.130.

Cipla: Geometry At Play

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A look at the daily chart indicates that the buyers are working their way around to accumulate the inventory that they want. This is quite apparent from the price action and the frequency lines displayed in the chart work like a charm.

Long positions may be considered with a stop loss at Rs.310, for a target of Rs.380. A breakout above the upper blue line would be a major sign of strength and could trigger a rally to the major target at Rs.440.

Reliance Industries: Understand the Language of Price

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Have a look at the daily of Reliance, featured below. After a sustained press-up (highlighted in the yellow shaded box) price ran into resistance at the red centre line and the prior gap area.

Notice how price cracked, once the low of the prior price bar was breached. The press-up and the subsequent crack is one of the signature patterns of the operators.

Look for this pattern in other charts. As my mentor would say “understand the Language of Price”. This would give a lot of insights about what to expect and how to trade.