RSI DIVERGENCE NOTICED - Will Market Fall?

 

IS MARKET HEADING FOR A CORRECTION

Technical Analysis of NIFTY and BANKNIFTY Daily Charts

Market is on a Bull run ever since aftermath of the fall in Mar-2020 due to Covid Panic. The acceleration has even increased after Nov-2020 when NIFTY broke its all-time high of 12400 level and started upward journey. The journey is still continuing as market is not showing any sign of fall.

Similarly, BABNKNIFY has also started its up move from Apr-2020, however, its pace was not as it was for NIFTY. BANKNIFTY had to struggle till Feb-2021 to break its all-time high of 35000 mark. The momentum is still continuing towards up and standing near the new all-time high at around 37700.

What is General View

Mixed responses are coming from the media houses as well as in the social network platforms, about the future of both these indexes. Both the indices as well as most of the blue-chip stocks are standing near their all-time highs. People start discussing about market correction each time the price reaches a new high. Each time experts predict market to correct, market makes a new high.

Prices do make retracements however for correction, there should be significant and noticeable reason. During pandemic when the entire world was in uncertainty, global sell-offs were registered, taking market down by around 40 percent causing a recession type situation. However, there is no such panic around now. Only because of Market is at all time high it is not prudent to say that it will fall.

 

Wait..... RSI Divergence Noticed !!!

RSI is a momentum indicator which is derived from the price action. When RSI reaches 70-80, it is said that, it is an overbought position, hence price falls. Similarly, when RSI is at lower side near 20-30, then it is called oversold and buyers take the control which makes price to move up. This is a general concept of RSI.

Like any other indicators, in RSI also there is divergence appears in rare occasions. Divergences are strong when it appears near the overbought or oversold regions. There is 3 Bar Divergence 5 Bar Divergence, sometimes even 9-12 bar divergence are also effective.

What is RSI Divergence

RSI Divergence at overbought zone is something which shows that Price makes new high, however RSI makes lower high. If the divergence appears in adjacent bars it is told to be more stronger. So 3 Bar Divergence is stronger than may be 5 Bar Divergence and 5 Bar Divergence is stronger than 7 Bar Divergence and so on.

NIFTY and BANKNIFTY Chart Analysis

If we look to the NIFTY and BANKNIFTY daily charts (which is also depicted in the below picture), a clear divergence is noticed (Blue Arrow in the below charts), indicating prices will correct from here. 

In earlier occasions when market was making new highs, there was no such divergence recorded on charts and hence market was making new highs. Since the divergence is appearing now, we can certainly tell that price will correct from here. However the divergence will be confirmed only when the market will close below the previous immediate low (marked in Red Line in the charts).

Similar RSI Divergences are also observed in many NIFTY50 stocks like Reliance, Kotak Bank, HDFC Bank, Indusind Bank and Bajaj Finserve to name a few. Charts depicting divergence are placed here to make the readers understand the scenario.

Placed below are analysis from few of the NSE Charts in which divergence are marked for readers understanding.

BAJAJFINSV

HDFC BANK

INDUSIND BANK

KOTAK BANK

RELIANCE

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Readers are also invited to read our recent posts where we have tried to explain movement of few stocks, most of which are moving in the anticipated direction.

• Coal is next gold posted on 25-Sep-2021
• 2 Multi-Bagger Stocks - Post Covid Scenario posted on 11-Sep-2021
• Hospitality And Textile Sectors To Grow Multifold In 2021 posted on 11-Sep-2021

Multi-Bagger Stock 25-Sep-2021

 Coal is next Gold

 

There has been a lot of action in the power sector in recent days. Power companies are set to augment their production process to meet the greater power demand. Since 70 percent of the power is from thermal units, the demand for Coal is likely to increase. At the same time, the mines owned by Private Companies are falling short on their production, forcing ministry of mines to warn the captive coal companies to produce more coal to meet the growing demands from the power sector.

While the private companies are still struggling to improve their coal production, Coal India Limited (CIL), which has a near monopoly in this sector, is set to see an exponential growth in its business.

During 2014, in a hearing to the Coal Scam, the Honorable Supreme Court had ordered cancellation of all coal block allocations made over the last 10-15 years. The center had offered around 35 coal blocks in the first ever e-Auction held during 2015, in which the coal blocks went to private companies like GMR, Essar, Adani, JSW, Jindal, Balco, Hindalco like companies. These companies were to use these coal blocks for meeting power requirements for their own industrial needs.

In the recent review carried out by the ministry, it was revealed that many of these companies are falling radically behind the schedule of coal production. Hence, in spite of having their own coal mines, to meet their power requirement, these companies are depending on the Coal India. This has resulted shortage of coal in the country.

While these captive companies will work on augmentation of coal production process which will take significant time for them, Coal India will emerge as the sole gainer to this opportunity.

In recent few months, the Coal India stock price has registered up move and has made a recent high of 170. Analysis on the technical chart shows the stock has broken the 80 weeks high and set for a trend reversal.

In case the trend continues and looking to the recent developments in power sector, the price of Coal India is likely to touch T1 near 200 and after that it may test the T2 near 250 in the coming months.

TECHNICAL CHART

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2 Multi-Bagger Stocks - Post Covid Scenario

You will get fundamental as well as technical analysis of multi-bagger stocks, especially selected for investors who wonder how to select stocks for investment.

1. V2RETAIL

FUNDAMENTAL QUICKLOOK

• Revenue and Profit level have gone down mainly due to lockdown impact

• In spite of low revenue income, the company has able to reduce its Debt to Equity ratio from 1.11 to 0.18 during FY 2020-21

• V2Retail Ltd. Is engaged in running wide chain of retail stores and pioneered the concept of Hyper-Market in India suppling wide range of products from home utilities to garments, mobiles, stationery items.(source: Money Control) Post pandemic situation when the markets are un-locked, positive impact on this retail chain is inevitable.

TECHNICAL VIEW

• Impact of easing of Lock-down has clearly been seen in the weekly chart.
• Current Price is 128.65 which 16% higher than previous week's Close
• The immediate resistance is at 150 level.
• Once it crosses that then it may ride the trend to achieve T1 at 180, T2 at 320 and T3 at 450 range. 
• The delivery volume has been significant during the past few weeks, which shows start of upward journey for the stock. Ref below chart taken from Money Control.

source: Money Control

TECHNICAL CHART

source: TradingView

Hospitality and Textile Sectors to Grow Multifold in 2021

Easing of Pandemic-led Restrictions and its impact on Hospitality and Textiles Sector

With speedy vaccination drives in India as well as in other countries, the pandemic-led restrictions are gradually easing out. The direct impact of this improvement can be seen in the Hotel, Hospitality and Travel Sectors as these were the worst hit sectors due to the Covid-19 restrictions world-wide.

Hospitality and Hotel Industries

With the gradual ease of restrictions and opening up of the lock-downs, business function has gradually started moving towards normalcy all across the country. Everyone’s favorite malls, shops and eateries have begun bustling with crowds reminiscent of the pre-Covid era and in order to meet the demands of these business centers, productions have to jumpstart in all sectors. 

Opening up of the production units will facilitate the migrant workforce to rejoin the job movement. This will initiate the process of movement of the workforce all across the globe and business travel. The Travel and Hospitality industry will be the major beneficiary to this situation.

The European Hospitality industry hopes that the removal of health restrictions would boost demand during the summer and thus, revenue growth; and has already taken pro-active measures.

To leverage this situation, some chains which have operations in India, have also started launching projects in new avatars. Recently as per article published in The Economic Times [Hotel companies put Covid blues behind them, to launch more properties - The Economic Times (indiatimes.com)], ITC Hotels, InterContinental Hotels Group (IHG) and Radisson Hotel Group have announced the launch of new hotel brands.

The indication of improving situation of the Hospitality industry can be noticed from the recent range shift in the price movement in their stock prices in this sector. The increase in delivery volume in stocks like INDIAHOTEL, ASIAN HOTEL (EAST), KAMATH HOTEL, ROYAL ORCHID, ORIENT HOTEL and ETIHAD HOTEL indicates this sector, which was, otherwise, in a drowsy state due to pandemic lock-down, will now start displaying a positive rally for a considerably longer time period.

This will attract stock investors to put their money on these industries.

Textile Industries

Similarly, for investors, it is a golden opportunity to invest in stocks in Cotton and Garment sectors as they have also been sluggish since the pandemic. With the retail outlets that have started opening up, demand for clothes have grown multifold. Lock-down had restricted the public to their home, thus leading to the success in the sales of home worn outfits, which were primarily marketed through on-line platforms. 

In a recent study it was indicated that due to lock-down people have put on extra weight which makes their old garments unusable. Now, when people have started coming to roads and markets, the demand for new garments will rise exponentially for a considerable amount of time.

Share Prices of all garment companies have started showing positive movement. Textile industries in India faced major losses in FY2020 caused by the shutting down of production as well as outlet units due to pandemic situation. To recover from this predicament, industries have already started implementing new strategies so that they can meet the growing demand of today's un-locked market.

The positive movement of Share Prices of Textile and related companies can be evident from the recent stock price movements of companies like HIMATSINGKA, RUPA, LAXMIMACH (Spinning Equipments), LOVABLE, MIRZA International (Leather garments), RSWM (Rajasthan Spinning and Weaving Mills), ZODIAC Cloths, KITEX, Bombay Dying, Siyarams Industries (SIYSIL), ARVIND Mills, etc. The delivery volume has been growing on these stocks.

In the coming days, investors will be putting their bets on these industries for multi-bagger returns. NRIs who have missed riding the recent rally in Metal and Pharma can eye on these stocks for decent return in coming days.

 

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STOCK DISCOVERY 07-SEP-2021

 JINDAL WORLDWIDE LTD

Multi-Bagger Stock

FUNDAMENTAL QUICKLOOK

• Revenue growth had reduced after Covid situation.
• There is a significant growth in Net Profit growth during 2021
• Debt to Eequity ratio has reduced to 0.95. Return on Equity stands at 10.51
• As the markets worldwide are gradually opening up, after Covid Lockdown, JindalWorld is likely to grow its revenue in Cotton and Garment sector. 

TECHNICAL VIEW

• The stock is trading currently at around 79.
• There is a resistance at 90, if this resistance is crossed, the stock has potential to touch 160
• Weekly RSI has also started moving up.
• Price has also crossed Weekly 200 bar Moving Average which is a good sign for up move.

TECHNICAL CHART

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STOCK DISCOVERY 04-SEP-2021

 BLUEDART

FUNDAMENTAL QUICKLOOK

• Revenue level is steady and consistent
• Net Profit has been stable except for 2020 Covid period
• Debt to Equity ratio has reduced to 0.4. Return on Equity stands at 17
• The premier and most trusted in the area of Surface and Air Courier, Packaging and Distribution company.

TECHNICAL VIEW

• Price has crossed 15 week high with strength in volume
• Weekly RSI is growing
• The stock has potential to touch 7500-8000 range with some consolidation near 6200 region

STOCK DISCOVERY 01-Sep-2021

DELTACORP - DELTA CORPORATION LTD.

FUNDAMENTAL QUICKLOOK

• Revenue was consistent till pre-Covid period and expected to take off post lockdown
• Net Profit was also consistent during pre-Covid period
• Debt to Equity ratio is 0
• Delta Corp is the only listed company engaged in the casino (live, electronic and online) gaming industry in India. 
• The company currently owns and operates casinos in India, in the states of Goa and Sikkim, offering approximately 1,800 gaming positions. 
• The on-line gaming business is set to grow at a rapid speed, so the company may leverage on this.

TECHNICAL VIEW

• Stock is forming a Reverse Head and Shoulder Pattern on Weekly Chart.
• Trend line is expected to break.
• If it crosses 201 and subsequently 225 Level, then it has potential to touch 280 after which we can expect the stock to rally up to 400 mark.
• Currently it has low risk level at 160 below which this setup will be invalid.
• Can be considered for monitoring for few days from now.

TECHNICAL CHART

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