Tuesday, May 26, 2020

Maruti ... Will the breaks fail for short term ?

Hello all ...

Herein I share my observations on the daily chart of Maruti. Again, due to multiple observations, the chart may look clumsy. Kindly read the theory alongside the chart. 



Pattern formation:
Stock is in consolidation since 24th March. This consolidation seems more like a symmetrical triangle. Breakout of the symmetrical triangle is at 5160 zone. 

Waves:
Not highlighting the details, but as per the hourly chart, the stock seems to be formating zigzag formation as per wave counts (with extended wave b). The Stock seems to be heading for wave C (impulse). 

Candlestick Pattern:
The last 3 trading sessions were pretty strong for the counter. Everyday closing was clearly higher than opening. Not exactly textbook replica, but still formation is more like three white soldiers. This pattern supports bullishness.

Fibonacci: 
Reverse retracement is taken from the top of 7230 to the bottom of 4000. The stock reached till 50% in the recent past and presently it's halting right at 38.2%, which is at 5228. This zone is coinciding with the symmetrical triangle breakout zone. On breakout, one can expect higher retracement levels to be achieved. (kindly note that importance is given to zone, rather than absolute number)

Ichimoku Clouds:
On 28th January, the counter fell below Ichimoku Cloud. Since then, it couldn't really surpass the clouds, and clouds became resistance area. It tried entering the cloud zone on 13th May, but couldn't sustain it. Successful closing came on 21st May inside the cloud. Follow-through buying was also seen. This is a positive sign as per the indicator. Doors are open till 5620. 

50 EMA:
Since breakdown during the end of January, 50 EMA on the daily chart is working well as resistance. The stock tried crossing it several times, but unable to do so. Presently, 50 EMA is placed right at 5240. This level is again in the same vicinity. 

RSI: During this entire consolidation zone, the RSI is gathering momentum. Kindly note that this is very common during the consolidation phase. The positive side of this is that the RSI is placed at 54.60, which is showing a good strength and any directional rally may gain decent strength. 

DMI: 
DI Lines are in consolidation mode, hovering near 25 mark. ADX line is at the extreme bottom. Any directional trade, when emerges, will likely be decent in magnitude

Volume:
Healthy volumes are seen in this entire consolidation phase. As this consolidation is at the lower end of the chart, calling this volume as accumulation volume would be fair. Though, confirmation will be on breakout/breakdown. 

Observation:
Today (26th May), the stock has managed to open with Gap. This gap-up opening has helped the counter to deliver breakout on the symmetrical triangle. This seems a very strong sign, provided closing turns decent. 

Putting it all together, symmetrical triangle breakout, Corrective wave formation, Ichimoku Cloud levels, 50 EMA & Fibonacci retracement, all levels are in the vicinity of 5200-5240. Strong RSI, stable DMI, healthy volumes, and bullish candlestick pattern formation are supporting a bullish view. 

Keeping the risk-reward ratio and own temperament in mind, one can initiate bullish trade.

- Kunal Rambhia

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