Mapping Markets

Price Is Everything

HBL Power Systems: Fully Charged, Ready To Go

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While the fronline stock market indices may be doing a whole lot of nothing, much of the action has now shifted to the mid-cap and small cap stocks. HBL Power Systems is one such stock that caught my fancy in the past few weeks. I can hear a few voice shouting why this stock? Be my guest and read through the rest of this post. Let’s start off with a monthly chart of HBL Power Systems.

HBL Power Monthly1

The blue line in the above chart would need little explanation to the regular readers of this blog. It’s nothing but erstwhile resistance turning support. The stock now is trading close to its all-time-high of Rs.64.5 recorded in April 2015. We therefore do not have any meaningful resistance to identify and use as logical target.  What do we do? You can probably use fibonacci projections. But I prefer Action-Reaction lines instead. Have a look at the Monthly chart below.

HBL Monthly2

I have used the same simple concept of resistance –> breakout–> Support concept in the above chart as well. It is no different from the horizontal blue line used in the first chart. Only difference is I used a horizontal line in the first instance and a sloped one in the second. Focus on principles, not the methods.

The lines displayed in the chart have described price well and notice have the price has pivoted at the dotted lines (representing 50% or half way mark). This suggests that the line and its slope have relevance and the upper magenta Reaction line may now be used a reliable target.  For someone looking to buy the stock, and willing to wait for a few months, may consider Rs.82 (upper Magenta Reaction line) as a target.

Let’s take a closer look at the price action in the daily chart.

HBL Power Daily

Those who believe in patterns may have already identified the triangle pattern and the breakout last week. Notice how the same concept of resistance –>breakout–> Support plays out in the daily chart too. Those who are convinced about buying this stock may have Rs.82 as their target. The stop loss for long positions may be placed at Rs.50.

I typically prefer a deeper stop loss for such positional trades, but trading style is such a personal thing. While the stop loss prescribed is at Rs.50, a breach of this level WILL NOT negate the bullish view. A fall below Rs.42 would make me abandon the bullish view. But, not for a moment am I suggesting a stop below Rs.42. Just detailing the observations so that you can design a trade plan that suits your risk profile.

Note: I own shares in HBL Power Systems.  I bought my first tranche last week and intend buying more this week too. I am NOT a SEBI-Registered analyst. Hence, please consult your financial advisor before taking any decision based on the contents of this post / site. Please read the Disclaimer.

KPIT Technologies: Time To Buy This Stock

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KPIT Technologies has fallen sharp in the recent months owing to disappointing earnings. The fall has been arrested right at key support zone and the recent price action suggests that buyers are active in the stock.  Have a look at the monthly chart of KPIT Technologies featured below.

KPIT Monthly

The recent fall has been arrested right at the key balance line highlighted in the chart above. Also note the pick up in volume as price approached this line, suggesting buyers were eager to step-in and buy the stock. If we drill down to the weekly chart, it is apparent that the stock has managed to edge above the prior swing high at Rs.116.1, which is an early sign of a change-in-behavior or trend-reversal if you will.

The stock has a resistance at Rs.142 in the monthly chart, and that is the target for someone wanting to buy the stock.

Let’s take a closer look at the recent price action by switching to the daily time frame.

KPIT Daily

It is apparent that the price reversed from the first gap zone on July 23. Notice the selling tail on that day and candlestick followers would probably call it a “gravestone doji”. The price has since dribbled lower to the support at Rs.99-101 range and there was a nice green candle on Friday, accompanied by a pick-up in trading volumes as well.

Also of interest is the gap higher up, highlighted in the daily chart. This gap is interesting because it coincides with the monthly resistance and Balance line at Rs.142. Why did this gap happen? Is it coincidence? Let me have your thoughts in the comments section below.  Hope someone responds as I have been used to nil response from you guys. Your feedback and comments are the only motivational force to post more articles. So, hope a bunch of you respond.

I expect the price to rally to the monthly resistance at Rs.140-142 zone. A breakout past the July 23 high of Rs.120.80 would reinforce the bullish view. A breakout and a subsequent retest of Rs.120.80-ish level would be a nice entry for those who are conservative. The aggressive trader can consider long positions at the current levels and on declines with a stop loss at Rs.99 and target of Rs.141.

Before I wind up the post, I wanted to share a Point & Figure chart generated using the “Trade Point” developed by www.definedge.com.The target based on the “vertical-count” works out to Rs.138, which is not too far off from the monthly resistance of Rs.142.

KPIT PF

“Trade Point” is a wonderful piece of software, especially for those interested in Point & Figure. Before you entertain other ideas, let me set the record straight that I have NO COMMERCIAL ARRANGEMENT with DefineEdge. I liked the software and hence wanted to mention it here.

Disclamer: I am not a Sebi Registered Analyst. Please consult your personal advisor before taking any trading or investment decision based off the contents of this site. I DO NOT own shares in KPIT Technologies, but intend buying it next week.

Lupin: Short-term Buy Candidate

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Along with many other pharma stocks, Lupin has also been in an uptrend in the recent weeks. The stock cleared a key resistance today at Rs.1,850-1,860 which prompted me to do this post.

Lupin Reco

As highlighted in the chart above, price has respected the blue pitchfork and seems headed to the middle line or the medianline. The breakout past the resistance is a positive sign and a retest of this zone would be a buying opportunity for a trip to the medianline.

Buy on a retest of the erstwhile resistance zone of Rs.1,850-1,860, with a stop loss at Rs.1,760 for a target of Rs.2,100-ish. There is a minor hurdle at Rs.1,960-1,990 which I expect to be negotiated eventually. Please do not hang-around with long positions if the stop is hit.

Disclaimer: I OWN shares in Lupin and intend to buy more as detailed above. I am not a SEBI-registered analyst. Hence, please do you due-diligence and / or consult your financial advisor before taking any decision based on the contents of either this post or this site. Other standard Disclaimer applies.

Fortis Healthcare: Ready For A Breakout

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The Fortis Healthcare has been consolidating in a tight range in the recent weeks. This consolidation has been just below the life-time high of Rs.187.50 recorded in March 2010. Have a look at the weekly chart of Fortis Healthcare featured below.

Forthis Weekly1

It is apparent that the Fortis stock has been oscillating within the confines of the magenta pitchfork for a while now. As highlighted in the above chart, price has managed to seek support just below the middle line and has manged to bounce back and close above the medianline last week.

The volume pick-up in the last couple of weeks indicates buying interest. Given this backdrop, it would be reasonable to expect the stock to reach the upper parallel of the magenta fork at Rs.220+.

The positive view would be under threat if the price slides below Rs.140. So, the chances of a rally to Rs.220 and beyond would stand negated if the price slips below Rs.140. But, with price currently ruling near Rs.180, the stop loss below Rs.140 would be unreasonable. So, Let’s drill down to the daily time frame and see identify some support close-by to use as a potential stop loss level.

Fortis Daily

As highlighted in the above daily chart, price has left behind a small demand zone at Rs.166.4-173. It is not sheer coincidence that price bounced, in the last couple of days, from the upper band of this zone at Rs.173. The stop loss for long positions may therefore be placed below the lower band of this buying zone at Rs.166.4. Have an allowance for volatility and decide your stop loss below Rs.166.40.

For those in a mood to learn something, this is simple concept of resistance-turning-support. Price seeks support or resistance at a level where buyers and sellers are trapped and not because of some moving average, fibonacci level or harmonic patterns.

If you still don’t believe this, take a took at the weekly chart featured below.

Fortis Weekly2

Disclaimer: I do not own shares in Fortis Healthcare. I however intend to buy it tomorrow. I am not a SEBI-registered analyst. Hence, please do you due-diligence and / or consult your financial advisor before taking any decision based on the contents of either this post or this site. Other standard Disclaimer apply.

Eicher Motors: Momentum Candidate

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Eicher Motors has been one of the star performers over the recent years. The stock was in a corrective phase in the recent weeks and the price action today suggests that uptrend has resumed. Have a look at the daily chart featured below.

Eicher

Price has broken out of a triangle pattern with a pick-up in trading volumes as well. There is room for appreciation based off daily and weekly chart.

There is however one word of caution. The stock is overbought in the monthly time frame and hence be cautious about managing the trade. This is a fast moving stock and hence follow / respect the stop-loss and protect unrealised gains if the price moves up.

I expect the stock to the hit the upper blue line at Rs.18,000. The stop loss for long positions may be placed at Rs.15,300. The risk-reward in this trade is well below my personal requirement of 1:3. But, I would not mind taking this trade as the stock enjoys investor fancy and the volatility has shrunk in the daily / weekly time frame, strengthening the case for a rally to the target.

This is a high-probability trade and hence I am willing to compromise on the risk-reward metric. Moreover, am banking on the momentum and expect this trade to work out quickly or get stopped out quickly.

Disclosure: I do not hold shares in Eicher Motors as of today. I intend buying this tomorrow. I am not a SEBI-registered analyst and please do your due-diligence before taking investment decision. Standard Disclaimer applies.