Stocks Archives - Page 2 of 23

Sun Pharma: Does Price Capture Everything?

July 21, 2015 by B.Krishnakumar Leave a Comment

Have you been surprised by how newsflow gels with price action? It should not if you understand the basic premise of technical analysis that the price action captures everything. Hence, the technical analyst can take investment decision by studying the historical price action. The recent examples from the pharma space reaffirms this basic premise. Price movement is driven by supply-demand. Newsflow, more often than not, tends to coincide with the price reaching key support / resistance levels. To word it differently, pro-money typically use news flow to load-up or sell their holdings.

Do not ask me if pro-money are privy to this newsflow ahead of others? The answer is very apparent and am unwilling to elaborate any further ! Here is a couple of examples from the pharma space where newsflow and price action has been interesting.

In a recent post on Lupin, it was highlighted how bad news (poor earnings in Lupin’s case) drove price lower to a key support in May 2015. The stock gained almost 25% from the lows established post the news-driven low. Let’s now switch to Sun Pharma. The stock has moved up steadily and as always, price rebounded from support. The recent rally has pushed the stock to a key resistance, highlighted in the daily chart below.

And, right at the time when Sun reached the resistance, the company issues a revenue / profit warning yesterday, citing issues relating to the merger of Ranbaxy Laboratories. The Sun Pharma stock has opened with a huge gap down today. But how far will it go down? That is for you to sort out. The only hint I can give is that price will fall to its next support. I would appreciate a few inputs from your regarding where this next support can come by.

The purpose behind the post is to drive home the point that the price does capture all developments pertaining to the stock / instrument concerned. So, believe your charts and trust your analysis.

Note: I do not own shares in Sun Pharma

Tata Steel: Nice Portfolio Candidate

May 5, 2015 by B.Krishnakumar 2 Comments

Before beginning this post, I must confess that I am slightly behind the curve in terms of writing this post. So, please do not bother to write to me saying that it is so obvious now or that I am late in identifying it.

The stock is a nice case study on how a trends turns around. The analysis in this post would be no different from the ones posted earlier relating to Sintex, Suven and others. Am putting out this detailed post to walk you through how price behaves. It is an exercise in letting you understand price action sans any indicator. Though the post may come across now as an exercise in hindsight, am just trying to re-build the scenario and walk you through the logical thought process.

Let’s get going with the monthly chart.

Notice how there was confluence of events suggesting price might have bottomed out last month. The first indication was the bounce off the “warning line” of the red upsloping Andrews Pitchfork. The classic bullish-engulfing pattern in April would have definitely caught the eye of candlestick observers.

Also of interest is how the price bottomed out at the lower blue balance line. A clear indication that a probable low is in place. Was there anything else which suggested that there could be further upside? Let’s drill down to the weekly chart and hunt for clues!

The bounce of the blue line (highlighted in the monthly chart) is far more clearer to discern in the weekly chart. Just take a cursory look at the gray lines which are potential resistance areas. We shall discuss those lines in greater detail in the daily chart.

Hope the above daily chart of Tata Steel is self explanatory. I am not keen nor motivated enough to delve any deeper than this. Do some homework and labor over the charts.

There a wealth of information available.Am sure, there would be positive divergence for those who swear by indicators. Plot Bollinger Bands and there will be classic reversal patterns in there as well. After all, all roads lead to rome. For those interested in getting their hands dirty with some hardwork may do a similar analysis in ONGC. The charts are no different.

Disclosure: This post is not meant to be a recommendation. It is just an exercise to demonstrate how simple tools and logical thought process would help you identify high probability trades. I own shares in Tata Steel.

Suven & Sintex: Nice Job By Pro-Money

March 16, 2015 by B.Krishnakumar 1 Comment

This post is just a follow-up to the prior posts on behavior of Pro-Money and reading price action. Let’s get started with Suven Life Science which was featured here a few weeks ago. Those who missed it may click here to read the post. Direct your attention to the daily chart of Suven posted below.

Price remained sluggish after the breakout and was essentially tiring out investors / traders. Notice how the price took off from the same spot, highlighted in the chart. Surprising? Not at all, if you can identify Pro-Money trail. Isn’t this what people call as a “Double-bottom” pattern?

Call it by any name, price rallied from the same level where pro-money tipped their hand earlier. As mentioned in earlier posts, Pro-Money would do whatever it takes to get their quantity they want at the best possible price. One of the common-ways is to tire you out.

This pattern happens over-and-again across all instruments and time-frames. Let me wrap up the post with the weekly chart of Sintex.

Regular visitors to this blog might recall my earlier post on Sintex where I observed that Rs.137 is where the price could run into trouble. Surprise, Surprise, price hits a high of Rs.136.60 on Friday and has since cooled off a bit.

There are lots of nuggets in the Sintex chart. Spend some time and am sure you can see them. If not, drop a line if you wish to learn them via soon-to-be started online webinar on technical analysis & trading.

Note: The post is meant to be an attempt to highlight how price behaves. It is NOT meant to be a trading / investment recommendation. I own shares in Suven & Sintex.

Suven Life Sciences: Another Breakout Re-test Candidate

February 12, 2015 by B.Krishnakumar 2 Comments

Continuing with the recent string of posts, this one too is to drive home the point that you just do not have to trade the breakout. Have a look at the daily chart of Suven Life Science featured below. Notice how there was an text-bookish breakout from a triangle pattern which was also accompanied by spike in volumes.

Just think for a moment as someone having huge funds (let’s call them Pro-Money) and wanting to buy a sizable quantity of a stock for whatever reason. The stock would have come up in the scanner of most analyst and it is precisely when the Pro-Money will stop buying.

Pro-Money cannot place a market order to buy the required quantity as price would then fly away due to demand overwhelming supply to such a big extent that it would turn counter-productive and result in exaggerated cost of acquisition.

The moment Pro-Money starts bidding aggressively, price begins to move up and beyond a point, this stock would show up in the scanners run everyday by other traders. So every other person gets interested to buy and this would again prove detrimental to the Pro-Money intentions.

So, the Pro-Money would seldom want to accumulate when the stock stock concerned captures everyone’s attention. What is the solution then for the Pro-Money?

One option is to withdraw / stop buying and may be even start selling a little bit. What this does is that there will be a momentary phase of selling overwhelming buying, leading to a gradual sell off in price. When price reaches Pro-Money area of interest, they start re-loading.

What this does is that the Pro-Money gets relatively cheaper entry and also the quantity they want without impacting price. The icing on the cake is that they end up making a little bit of money by selling the shares at higher levels (to induce correction) and buying it back at lower levels.

The basic idea is to ensure that the crowd interest is shifted away from the stock. Imagine for a minute that you buy the stock when there is a breakout or a big move. If price starts to grind lower, the immediate reaction would be to exit and jump to another stock.

Pro-Money would do whatever it takes to ensure that the crowd sells their holding to them at a cheaper cost. One of the easier methods is to push the stock below commonly known support levels such as moving averages, fibonacci retracement or moving average crossovers.

So, remember that price does not rise or fall because it hits a moving average or some exotic harmonic pattern. It is simple supply-demand that moves price and the price does not know that there is some moving average it has to respect.

Note: This post is not meant to dish out a trade recommendation or view on the stock. The objective is to highlight what drives price and how to read price action. I own shares discussed in this post.

Gujarat Gas: Another Case Study on Breakouts

January 29, 2015 by B.Krishnakumar 2 Comments

Hope my earlier post on Sintex was informative. This post is in the same genre to drive home the point that price fluctuates and there is always a better entry if one has the discipline to patiently wait. But, it is easier said than done, and it is so very easy to take a trade while watching the ticker real-time. Imagine this:

You have a set of stocks in the watch list. When the market opens, the stock that was analysed the previous day or earlier usually finds place in the watchlist. We typically start the day, saying to ourselves, let’s not chase price and wait for a pull back. All is well it now.

The market opens and the price of the stock concerned remains sideways for a while. We keep watching and suddenly a spike happens. Volumes pick-up. The immediate thought that occurs is that let’s me buy the stock right now or it might just run away without me. By the time the order gets executed, price runs up more and we invariably end up buying at the high of the move.

Does this sound familiar? Don’t feel guilty as this happens to everyone. The idea behind the recent posts is to help you break this habit. But the pro-money would do whatever it takes to lure others to facilitate their mission of getting relatively cheap entry.

Let’s now switch to Gujarat Gas. Have a look at the daily chart featured below.

Am not getting into details. Would be happy to read your thoughts and comments about this stock. Let’s make it a little more interactive.

I do not have any exposure or position in Gujarat Gas as of today. This post is meant to be educational and the intention is to explain how price moves or rather orchestrated.