Cholamandalam: Will Murugappa Group Outperform Peers ?

Hello All, 

Herein I share my observation on daily chart Cholamandalam Investment & Finance. 

Daily chart

Pattern Formation:

On the daily chart, the stock was clearly under bearish trend with sideways bias, forming a falling wedge. Pattern breakout got confirmed today based on the closing price. Breakout candle seems extremely bullish candle with closing near high. The falling wedge formation is getting initiated from 200 zone, which seems the likely level to get achieved, if the rally continues. 

Wave formation:

The entire fall from the top seems like an impulse, with the last leg being ending diagonal. Further formations seem like corrective up. One needs to remember that the expected up move is a counter-rally of the main downtrend.

Volume:

During entire wedge formation, ascending volumes were seen, which can be labeled as accumulative volumes. Breakout day volumes (today's volume) are the highest recorded single day volumes of the last 4 years. 

RSI:

Momentum indicator is rising steadily since 23rd March and clearly making higher bottoms. The stock was forming lower bottoms, which confirmed bullish divergence. RSI indicator is at 60, which confirms decent strength in the ongoing direction. 

Ichimoku:

The stock entered the cloud zone on 10th June and since then it was in consolidation within the cloud, hovering near lead 1 and taking its support. There seems a new rally emerging in the counter after clearing all hurdles.  

Retracement:

If Fibonacci reverse retracement is applied from the top of 350 to the bottom of 150, 23.6% is placed at 175 and 38.2% retracement level is placed at 208 zone. 

Role Reversal:

Falling from 350 zone, during October 2018, the counter made a decent bottom near 208 zone and bounced back to 350 zone. In the recent crash, the counter fell decisively below the 208 zone. As per role reversal, earlier demand zone may act as supply zone. 

Relative Performance:

Here, all peers are compared on the price chart on a relative basis. In the first chart, it is seen that the entire sector is under the positive consolidation after making a bottom during mid of March. Most of the counters have claimed a 23.6% retracement zone. 

In the second chart (zooming only on recent uptick), Chola (highlighted in blue color) seems to be clearly gaining strength. 

Putting it all together:

Falling wedge breakout and supportive wave formation with the highest volume within the Ichimoku cloud with strong RSI and outperforming peers support bullish view. 

Reverse Fibonacci 38.2% level is getting coinciding with previous support (now probable resistance) zone and the beginning of falling wedge formation may act as a probable target zone (approx 200-208).  

Statutory Disclosure:

Kindly note that this sharing is only for educational purpose. It is safe to assume that my personal position, my fund's position, and my client's, as well as relative's position, maybe open in the counter. Kindly prefer to take the advice of your financial advisor before initiating any position. Prefer to keep the risk-reward ratio in mind based on personal temperament and background. 

Cheers,
Kunal