ANALYSIS DATE: 04-10-2023
We are here to delve into a specific stock: Power Grid. In today's bearish market conditions, it's crucial to identify stocks that have shown bullish tendencies. At EXP Invest, our motto is to enter stocks before the rally, not after. So, let's take this opportunity to analyze Power Grid's performance over the last few weeks and determine whether it's a suitable entry point or if it's time to hold or exit for existing positions.
POWERGRID: A Resilient Uptrend:
As we begin our POWERGRID Analysis, we'll start with the largest timeframe, the monthly chart. The chart reveals a strong uptrend. Despite two significant downward spikes in 2008 and 2020, Power Grid managed to recover rapidly. In 2008, it witnessed a 90 percent recovery, followed by a 140 percent recovery in around three to four years. Another rally of 128 percent occurred in just three years. This indicates that Power Grid is a slow-moving stock compared to small and mid-cap stocks. When it declines, it typically experiences corrections of 30 to 40 percent.
Weekly Timeframe: Volume Insights:
Moving to the weekly timeframe, we observe that volumes remain consistent with the last hundred days' average volume. The Volume MACD histogram considers the hundred days' activity, even in the weekly timeframe.
Daily Timeframe: Key Moving Averages and Resistance:
On the daily timeframe, Power Grid remains above critical moving averages, such as the 200, 100, 50, and 20. This is a bullish sign. However, it's also important to note that the stock is currently near a key resistance trend line. Last time it touched this resistance line, it led to a 23 percent correction. This suggests that now might not be the ideal time to enter the stock.
Lower Timeframes: Signs of Weakness:
Diving into lower timeframes, we notice several signs of weakness. When the price of POWERGRID declines, volumes tend to increase compared to the last hundred days' volume. This indicates continued weakness. Furthermore, the Relative Strength Index (RSI) on the 15-minute timeframe shows signs of a negative range shift, suggesting an impending correction.
Short-Term Outlook for POWERGRID:
In the short term, POWERGRID faces resistance around 200. For swing traders, a more significant resistance level could be 202 or 203. Maintaining a stop loss is crucial when holding Power Grid. The 200 EMA on the 75-minute timeframe serves as a key support level, so a stop loss should be set slightly below it, around 191 or 190.5. The target should be around 206, offering a 1:1 risk-reward ratio.
POWERGRID has shown a dominant uptrend with periods of rapid recovery during market crises. However, it's a slow-moving stock and currently faces resistance. Therefore, making fresh entries is not advisable. Existing holders should maintain stop losses and targets.
For those seeking short-term stock recommendations, it's essential to focus not just on stock names but also on proper position management, stop losses, and risk-reward ratios. Swing trading success requires disciplined risk management.
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