Time frame: 75mins
A picture is worth a thousand words. Read on if you are interested in the story behind this 75 minute price chart of VAIBHAVGBL.
Indicators Analysis:
RSI
Showing positive divergence against price movement- POSITIVE
MOVING AVERAGES
Lagging indicators no positive element developed yet.
TRENDLINE
Double support near the price's lowest point, providing multiyear support to price.
What story are the Drawings telling?:
Green rectangle
Buying range for a 'prudent' entry. Why? Price is expected to dip a little given the market consolidation in which stocks yet to move can give a spike. Setting either bracket orders or GTT orders help catching desired price in catching sudden price dip and recovery (also called spike).
Stoploss
The stock is to be EXITED if the double trendline support is breached. Providing buffer from the support helps avoid most price whiplash movement. If this level is breached, exiting with small loss is a prudent choice for traders and investors alike because the stock is likely to dip further 14-20%.
Target
Targets are determined based on past key levels which offered the price support when it was trending higher and will most likely offer resistance to price when it reverses to move forward.
Additional analysis:
Fibonacci levels (not shown on chart)
Drawn from bottom of 113 on 24th March 2020(covid low) to highest price of 1050 formed on 11th May 2021 shows that price is right now at 78.6% retracement- a key level, thus adding to the cluster of positive evidences mentioned above (RSI positive divergence, double trendline support).
So, what makes this idea RISKY?
The short-term volume profile suggests it is still too soon to buy, but that’s not all bad, because there have been multiple days of heavy buying in this stock as visible from repeated spikes on the chart.
The long-term profile of volume (not shown on chart) shows buying interest has consistently grown during price lows. This is an indication of big money flowing into the stock indicating it was being considered a ‘good buy’ among big boys. Historically this activity has been noticeable near the stock lows and followed by strong upside activity. The recent activity of volume spike clusters near the recent low price in the last 40 or so days has had enough impact to help the 200day EMA (volume) turn up which respecting the upward sloping trendline. This is another evidence for the cluster of evidences.
Some macroeconomic perspective:
The global and domestic markets are either in turmoil or on the edge of one. Under such a circumstance supports break, analysis goes out of the window and stock portfolios suffer great loss.
The current conditions (political unrest – China’s stance towards US delegate visiting Taiwan, raging inflation, interest rate hikes worldwide- meaning fiscal tightening- meaning lesser free money- meaning lesser investments- it’s a long chain of dynamic correlations) are not prime for the market investors considering stock market’s allergic reaction to all things ‘weak economy and worsening data’.
Lastly, using stoploss is prudent for those who love their post-tax savings and don’t want to sit out capital erosion rather than attempting re-enter at lower levels if opportunity persists.
Thanks for reading.
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