Mapping Markets

Price Is Everything

Maruti Suzuki India: In Top-Gear But…

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Maruti-Suzuki has been one of the top performers this year and the stock has been a big out-performer versus the Nifty. The recent price action however suggests that profit-booking by big-players is happening. Before we delve any further, let me make it clear up-front that this post is meant to be just an observation / interpretation of the recent price action in Maruti Suzuki. This is NOT meant to be a view or an opinion or a trade idea.

Have a look at the daily chart featured below.

Maruti Daily

The negative divergence between the price action and the 14-day Relative Strength Index (RSI) is glaring. Let’s put that aside for a moment as the focus in the post is about likely “distribution” by big-players. If you pay attention to the volume signature, there has been a pronounced increase in volume at the top-end of the range which is a sign that there are sellers at higher levels. This would not be the case if the large-operators are in an accumulation-mode.

If the trading range constitutes accumulation, volumes typically tend to be higher near the lower end of the range. This is logical as anyone wishing to accumulate shares would want to do it at lower levels in a bid to keep the average cost down.

Now, notice two pokes above the upper end of the trading range.

The first poke happened in September 30, 2015 where volumes were relatively high. Notice how volumes bulged in the upper half of the range which is a tell-tale sign of selling by the biggies. The second poke above the trading range happened last week. Recall the newsflow leading upto this breakout has been extremely positive: Improved quarterly earnings and inclusion in the MSCI India index.

Despite this, the price has not managed to clear the trading range. Look at the volume accompanying the second poke, it is relatively lower compared to the first poke. The sharp reversal on Friday, with huge volume suggests that there are sellers at higher levels. If the newsflow is positive and buyers are in control, will it not be logical to expect price to breeze through the upper end of the trading range and zoom ahead?

This surprisingly is not the price action we get to see in Maurti Suzuki chart. It would not be out-of-context to suggest that a clear breakout above Rs.4,800, with higher volume, would be needed to calm the nerves of those harboring bullish view on Maruti. Let me just end the post right here and those interested in taking this discussion forward may look for similar examples and the follow-up action.

Public ChartList at www.StockCharts.com

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I was surprised to discover the kind of tools and educational material available at www.StockCharts.com. The feature to post “Public ChartList” was the one that I discovered recently. It is an easy way to share charts and observations at a single place. I have started my own list there and you can access it at http://stockcharts.com/public/1709831

The idea here is not to share trade ideas but to list out stocks that I find appealing with the reasons annotated in the chart itself. Hope you find it informative and useful. I have decided to use it as it is an effective shortcut to highlight and share my thoughts instead of doing a full fledged blog-post.

It does not mean that I will stop posting here. A few of the stocks listed in the list will be covered in greater detail here in my blog, if the price action is conducive.

Rather than posting a chart of each and every chart that I find interesting, the Public ChartList feature is any easy way to bunch them all together at one place for easy reference.  Please feel mail / share your charts / charts that you find interesting. I will include them in the list with my jottings.

The best part is that the price gets updated automatically in the chart. This dynamic nature of chart presentation is another impressive aspect that prompted me to set-up this list.

PS: If you or any of your friends are members at www.StockCharts.com then please share this list with them and also ask them to cast their vote for my list.

Nifty Futures: What Next?

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For a change, I decided to post about Nifty Futures. Before getting any further, take a look at the recent string of messages posted in Twitter recently.

And here is the updated hourly chart of Nifty Futures mentioned in the third tweet above. The idea behind this post is to highlight how price moves from one zone to another and how Andrews Pitchfork gave the perfect trade location for the short-trade. Take a look at the chart below. NF hrly Those who have not figured out the reason behind the blue-ellipse in the chart above, it is nothing but price a landmine-zone that I talked about in the Monthly Nifty chart in an earlier post. The price has consumed demand on its way up which is a clear warning that price would collapse if it were to revisit it. And, that is what happened. Not surprising at all and this was clearly mentioned in the second tweet above. Have a look at the chart in that message and I mentioned clearly that price would fall sharply if it reverse from the upper parallel. It is not my intention to do a #AsToldBefore post but to emphasize that price and simple tools give you lots of information to trade. Nothing fancy. The immediate target for the Nifty Futures is the medianline at 7,620-7,630. This range is not too far off from the immediate demand zone at 7,560-7,630. Hence, it would not be outlandish to expect some respite at the 7,560-7,630 zone. A look at the daily chart indicates that the next significant support zone comes in at 7,230-7,260 zone. I would not be surprised if we eventually test this daily support zone. The swing high at 8,125 is the level to conquer as of now, to suggest the case for a meaningful recovery in the Nifty Futures. Disclosure: I have a long-term portfolio of stocks comprising of Nifty constituents. I also hold short positions in the Nifty Futures.

Sintex Industries: Same Old Theme

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Even at the cost of sounding repetitive, I am going ahead with the post as similarity between the recent examples are striking. In the recent posts on Lupin and Sun Pharma, I had highlighted how price makes a move, ahead of the newsflow, to an area of resistance / support and the news follows suit, facilitating pro-money to take advantage of. This theme is so very common that I can write reams citing examples. But, I will stop short with Sintex Industries.

Sintex

As highlighted in the above chart, there was a big rally on July 7, accompanied by higher volumes. Am sure this stock would have popped-up in the scanner-list of lot of analyst and traders after this move. The stock does nothing for the next two days and then cracks big time, courtesy disappointing earnings.

Where did the July 7 rally take us to? Right to the resistance and is it still surprising that news flow followed suit? And if the earnings was that disappointing, don’t you think price should have cracked big time and the stock should not be where it is now.What do you think  happened between July 7 – July 15? What are the clues that you can pick up?

It costs me nothing to answer the above questions by spending a little time and typing a couple of paragraphs more. But, I think that would rob the learning opportunity. Hence, I am winding up the post rather abruptly and expect some feedback from you in the comments section below. A detailed analysis from your side would be appreciated. Will post a trade idea in Sintex in the premium segment over the weekend.

Note: I own shares in Sintex Industries

Eicher Motors: Is The Momentum Slowing Down?

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Eicher Motors has been a dream stock and has had a wonderful run-up in the recent months. Why am doing this post is to highlight few niggling concerns in the daily price chart. There is a clear slowdown in the upside momentum in the recent days.  Have a look at the daily chart featured below.

Eicher

Notice how the price fell sharply on July 3, completing a “bearish engulfing” candlestick pattern in the process. Though the stock managed to recover ground since July 3, it is glaring that the price has really struggled on its way up. Why and how do I say that? The fact that the stock took 12 trading sessions to recover the fall recorded on July 3 is glaring enough I guess.

My assessment based on this price action is that pro-money has been distributing or taking profits on the way up since July 3.

To my eye, the move up since July 3 is no different from the pattern in the 15-minute Nifty futures chart referred to in an earlier post. Those who believe in indicators would have noticed the negative divergence between the 14-day RSI and the price action.

After reading all this, am sure you would have realised that I have a bearish view on the stock. But, this view means nothing and price does not give a damn to my view. Though there are early warning signs, unless we see a fall below 19,900, there is really no case for turning bearish on the stock.

The purpose of this post is to issue an alert, just in case my bearish bias is validated by price action. I have posted this today as the company reported its quarterly earnings last evening and am no Fundamental expert to comment on the performance.

If you own shares in Eicher Motors, then by all means enjoy the run. But do not get carried away and have protective stops in place, IF price were to take a u-turn.

Note: I do not own shares in Eicher Motors. The purpose of this post is NOT to give a recommendation on Eicher Motors but to direct attention to the nuggets & clues that price leaves behind.