RIL has come out with a very important statement yesterday. It struck gold (crude) in the K.G.Basin. A very positive development as the company claims that this will reduce our energy bill drastically. Well so be it! But as a trader we aint interested in news we are interested in charts and in what the charts might be revealing. A quick glance at the weekly chart first, to be followed by the daily chart.
The Weekly Chart
We had three lower lows in RIL weekly chart and all the three were accompanied by three higher lows in the MACD histogram shown in the lower pane! Yups it is indeed bullish divergence on the weekly chart and a good one too. The price has drifted back to the value zone and the last impulse bar is blue removing the ban from going long. 1950 is a good support on weekly chart.2120 offers some strong resistance, a weekly close above 2250 is the signal for the bears to leave this counter alone.
The Daily Chart
The daily chart also conveys the same thing. The price is nesting at the value zone, for the aggressive buyer a buy can be triggered above 2075 and for the conservative, above 2120. The targets suggestive are 2250/2350 and a meaty 2650! We have done the 23.6% (2030) retracement (Nifty is yet to do this leg) from the lows of 1765 to the highs of 2110. The 38.2% at 1980 is another possibility which the price can test; personally this would be The Ideal place to go long with a very tight stop below 1950, a real good risk reward set up.
With the volatility we witnessed in the last week, most of the stocks have had bullish divergences; these signals though very potent also do fail sometimes (The Hounds of Baskerville as explained by Dr. Elder), therefore it is very important to always wait for price confirmation and even more important to be very particular about your STOPS!!!
RIL has done its first move following the positive divergences.It has to pause to correct its short term excesses and you need to calculate retracements for this recent rise for an efficient re-entry point(which we call in EW as a second wave down ) and the next upmove should be quite big compared to this 1st move. So we need to position ourselves for a good retracement point.
ReplyDeleteI find the Banking sector having very bullish set up (Public sector banks)..eg.SBI, PNB, stocks like NTPC, L&T .
The current week being settlement week, our markets are likely to behave depending on OI positions and rollover concerns.Though I feel 4100 should hold or higher levels, we need to see tomorrows price action's effect on hourly technicals.
Contact me thru' mail.. vanilango@gmail.com
Good Luck to your trading.