Edelweiss Wealth Research ChartWatchers – Surfing the Tide
Sagar Doshi Ankit Narshana Parag Shah Research Analyst Research Analyst Research Analyst [email protected] [email protected] [email protected] Date: February 9, 2021
Chartwatchers Surfing the Tide
In our previous report of Chartwatchers (Jan’20) we had cautioned about the market Trading Desk crash and US entering into recession in the 1st quarter of the year. Post that in our follow up report titled Navigating bear market (April’20) we expected world indices to Sagar Doshi Research Analyst bounce approximately 40% before undergoing second round of correction. [email protected] While equity markets crashed and US entered into Recession, it marked bottom for Ankit Narshana many indices, as they broke out from the prolonged consolidation. Research Analyst In this edition of Chartwatchers we have presented opportunities as well as risk in [email protected]
various asset classes. Parag Shah Opportunities - Research Analyst [email protected] Dollar bear market is here to stay for a longer period of time.
Bearish dollar should give emerging equities lot of strength in coming years Lots of equity indices from emerging countries such as Korea, Taiwan etc. have broken out of the long term consolidation, indicating long term picture remains brighter.
Most indices across the world have begun its 5thwave as per Elliot wave theory. This
can last longer.
Dr. Copper is showing substantial upside in long term as it breaks above the long triangular pattern. Nifty long term target as per Fibonacci extension on linear and log scale comes at 17700/18500.
The ratio of bank nifty to nifty indicates bank nifty outperformance is here to stay for longer period. Thus for nifty to close above its resistance, outperformance of bank nifty is crucial. Midcap and Small cap should begin to outperform Large stocks whereasCyclicals should outperform defensive.
Risks -
After a spectacular run up in equity markets across the world we believe many large cap stocks and indices are near to its key Fibonacci levels. However, selective opportunity lies within the sectors, midcap and small cap stocks. Nifty too is close to achieving its Fibonacci extension target in range of 15250- 15500
when measured from the highs of January’20 to the lows of March’20 st A seasonal trend on Nifty shows 1 quarter to be a topping out quarter for index. Most of the minor or major tops are formed in the month of January- March.
Drawdown analysis done on Nifty shows index tends to correct 20% from the top after rallying 65% or more without an intermediate drawdown of 10%.Current Index rally is close to 70% without any 10% drawdown in between.
World market capitalization has deviated the most form its 200 day moving average, such extreme deviation from long term correlation has always succeed short term corrections to intermediate term corrections. The percentage of stocks above 200 DMA in Nifty 50 and Nifty 500 has reached 100% indicating a sign of extreme optimism.
If there is a correction then 23.6% retracement of entire rally comes around 13200
whereas previous swing high is at 12430. Thus a correction towards these level should be re-assessed for taking long position.
Date: February 9, 2021
Edelweiss Wealth Research 1
Chartwatchers
The Opportunity
The Long term Picture- It’s all about dollar The year 2020 started with several structural changes in the price; the foremost that is going to stay with us for the several years from now. Breakout from decade long consolidation in several equity indices and dollar index entering into the bear market are the key theme to be watched for years to come.
Let us begin with the reflation trade- Dollar bear market. In the past several reports we have been writing about the dollar bear market, a trend which has changed after 7 years. The below chart is the reason why we believe dollar bear market is here to stay with us for years to come. The 7years and 9 years cycles between bearish and bullish periods are alternating each other. This means that starting from 2017 we should be looking at 7 year bear market in the dollar index.
Time cycle analysis
Source: Bloomberg, Edelweiss Wealth Research
Putting an Elliot wave perspective in the chart, the rally in 2020 retraced almost 100% of its previous fall; but failed to break above the high of 2017, we label the top of 2020 as wave B or wave 2. The fall thereafter is part of wave C or wave 3. This fall should continue till at least 83 level in next few years.
Elliot wave theory indicating 2 year bear market in dollar
Source: Bloomberg, Edelweiss Wealth Research
So what are the possibilities if dollar remains in bear market for the next few years? 1) Precious metals and commodity price to rally 2) Emerging currencies to appreciate against dollar 3) Increase of foreign flows in emerging equities 4) Pressure on emerging debts and bonds to reduce 5) Potential for nominal inflation
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Chartwatchers
Apart from dollar index there are many other asset classes and equity indices which have broken out of the long consolidation. Prices breaking out of consolidation usually results in sharp move in the direction of the breakout. Breakout from consolidation also stays for longer period of time and is also associated with wave 5 in Elliot wave. Wave 5 generally ends up at all-timehighs and since these are multi-year trend 5th wave also lasts for many years.
Let us look at the charts!
Dow jones industrial and mining index Multiyear breakout on the Metal and Mining Index.
Source: Bloomberg, Edelweiss Wealth Research
The Dow Jones Industrial and Mining Index has broken out of an interesting pattern. After a sharp fall in 2008 where the prices declines vertically, the Index went into long consolidation. However, during this consolidation, prices kept on making lower swing highs but failed to make lower lows. A sudden crash during covid resulted in break of previous supports but this time price negated the further down move and in fact reversed in the opposite direction. Such a failed breakdown also called ‘throwover’ are an indication of strong change of hands from sellers to buyers. We believe a larger, multiyear trend up move has begun in the index
Copper
Copper price breakout has a historical resemblance
Source: Bloomberg, Edelweiss Wealth Research
The monthly chart of copper shown above has an equality in terms of pricecorrection and pattern formation. Earlier in 1994 – 95, Copper prices witnessed a fall of about 58%. Post this fall, copper prices formed a base around $55 - $60 levels and gave a breakout from a “Double Bottom Pattern”. Technically, this price pattern is extremely bullish and hints at a price reversal. Interestingly, copper prices have seen a decline of about 58% during 2011-2015 from levels of around $500 to $200. Prices formed a base around $200 and also have given a breakout from a “Double Bottom Pattern” in 2020. Taking cues from the previous breakout, copper prices should head for multiyear up move.
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Chartwatchers
Silver
Silver price breaks out from 5 years of consolidation
Source: Bloomberg, Edelweiss Wealth Research
Silver price which consolidated for more than 5 years within the range has broken above its range on the upside. Moreover, price retested the upper end of the consolidation range when it recently cooled off. On the weekly chart above, using channel projection on the chart price looks to be heading towards $40 in the near term.
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Chartwatchers
MSCI emerging market ETF
Index has given a multi-year breakout from an ascending triangle pattern
Source: Bloomberg, Edelweiss Wealth Research
Dollar index which has a strong correlation with emerging market ETF, was in a strong uptrend since 2008 whereby developed market outperformed emerging market. But now, with a throwover in wave e, it seems table has turned towards emerging market outperformance over developed market. Emerging markets have come out of the large consolidation and could see a substantial up move in upcoming years.
MSCI Emerging index vs MSCI developed Index
Ratio of MSCI EEM to MSCI Developed breaks out of 10 year bear market
Source: Bloomberg, Edelweiss Wealth Research
Since 2010 many emerging market indices like Kospi, TWSE (Taiwanese Index), shanghai were consolidating in a broader range whereas India continued to trend higher. After the second quarter of 2020 Kospi and TWSE broke out of its consolidation resulting into 10 year breakout. This also resulted breakout in ratio of MSCI Emerging index vs MSCI developed market. Ratio has broken its 10 year downward sloping trendline indicating a change in trend.
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Chartwatchers
Taiwan
A 30 year breakout in Index
Source: Bloomberg, Edelweiss Wealth Research
Ever since 1989, Taiwan Index has seen a stiff resistance around the 12000 levels. On a longer time frame, the Taiwan index has been consolidating in an “Ascending Triangle Pattern”, where prices made higher bottom and faced resistance at a particular level. Every time, the prices came close to the resistance level, it witnessed severe selling pressure and cracked down. However, since the 2008 global meltdown, prices have been reacting in a different manner. Now whenever the prices came close to the resistance level, the corrections were not sharp and steep as seen before.
Eventually, in October’2020, prices managed to breakout of the zone which had been acting as resistance level since more than 2 decades. Technically, this is an extremely bullish event and the trend could remain bullish for a long time.
Kospi
Breakout from long consolidation
Source: Bloomberg, Edelweiss Wealth Research
Kospi Index was in an uptrend from 2003 till mid-2007, making higher tops and higher bottoms throughout. After the 2008 global meltdown, the prices clawed their way back to test the previous peak levels registered in 2007 only to face resistance at those levels and see a decline. The prices went under a time correction from thereon where the prices traded in a tight range for as long as 6 long years. In 2017, the Kospi Index finally conquered the resistance level of (Mention Resistance Level). But this breakout was short lived as the prices couldn’t give a follow through and the prices retraced back below the breakout level. Recently, post the fall seen in the markets because of the corona virus pandemic, the Kospi Index not only retraced back the losses but also broke above the earlier resistance level of 2100-2300.
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Chartwatchers
Nikkei
Index coming out of a base formation
Source: Bloomberg, Edelweiss Wealth Research
The Nikkei index has given a breakout from a “Rounding Bottom Pattern”. Technically, a Rounding bottom pattern is associated with a gradual fall in prices and a steady base formation and then a gradual recovery from the base. The breakout from the rounding bottom patterns are long term reversal pattern which stays for longer period of time.
Nikkei index which was making lower tops and lower bottom since 1990 till 2009 changed its trend gradually. Since then,As shown in the chart above index formed a rounding bottom pattern and also broke out of it, confirming a larger base formation.This breakout on the index is very recent and is long term in nature. This also indicates that the Nikkei has unsustainable in nature.
Defty
FIIs to make money after a decade of consolidation
Source: Bloomberg, Edelweiss Wealth Research
Nifty in dollar terms, which consolidated for more than 10 years broke out of the triangle pattern in 2020. Up move from wave e, marked wave 1, thereafter price retraced close to 80% of wave 1 marking a bottom as wave 2. Wave 3 is in progress now and thus this index looks to be a buy on dip index till the time we see 5 wave up move in the same.
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Chartwatchers
Nifty- Long term- The brighter picture Let us look at the nifty long term chart with two different technical methods
Nifty- Elliot wave perspective A break above 12430 and extension of more than 138.2% suggests nifty has resumed its long term impulsive up-move.
Our preferred view remains as show in the chart below. Nifty is in Grandsupercycle wave (V). Within the wave (V), price is currently trading in cycle wave 3 which is extended. As per wave equality at 17700 nifty shall complete intermediate wave 3. Nifty in long term looks to be headed towards 17700
Source: Bloomberg, Edelweiss Wealth Research
Nifty – Point and figure
Point and Figure too projects target above 17500
Source: Tradepoint Web, Edelweiss Wealth Research
One of the oldest methods of charting, “Point and Figure” charting method gives us an objective way to analyse the charts, removing the noise (consolidations/ small moves) completely. The long term chart of Nifty suggests that it is in a structural bull market. Long columns of “X” denote higher swing moves on the upside. For e.g. Move from ~12000 to 13500 came in a single swing move, without giving any major correction. The same move was captured in a single column of “X” by this chart. Relative to the moves on the upside, the down moves are much smaller, suggesting that the corrections in the Nifty are short lived and the Nifty again resumes its upward move. In the long term, as per the current setup, the Nifty is heading towards targets of 17200 – 17500.
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Chartwatchers
Bank Nifty to Nifty ratio
Source: Bloomberg, Edelweiss Wealth Research
Bank nifty to Nifty ratio chart above cooled off to its previous support zone. These support levels holds a lot of significance for bank nifty outperformance over nifty. Recently the price on the ratio chart came close to the support line and reversed; indicating bank nifty should outperform nifty in near term.
Bank nifty Index Banknifty should outperform nifty going ahead.
Source: Bloomberg, Edelweiss Wealth Research
The Weekly chart of bank nifty above shows the breakout in the index. While Nifty has extended much above its previousall-time high of 12430, bank nifty which contributes more than 30% weight in Nifty 50, should play the catch up role if it has to keep the upside momentum intact. Thus look for buying bank nifty and stock within these space for an upside potential of 15-20% from hereon.
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Chartwatchers
Awakening of the Value Indices- Russell 2000 vs Nifty Midcap
Strong correlation with Russell 2000 suggests CNX Midcap still has lot of room on the upside.
Source: Bloomberg, Edelweiss Wealth Research
The above chart shows correlation between Russell 2000 Index and Nifty Midcap Index. While US Midcap Index (Russell 2000) has extended 161.8% above its previous high. Nifty Midcap Index has remained a laggard in this rally. With the strong correlation between the two we expect midcap index to play the catch up role with Russell 2000.
Bottom 10-20% percentile stocks in Nifty midcap should be in focus
Source: Bloomberg, Edelweiss Wealth Research
The equal weighted chart vs the market cap weighted chart shown above suggest that although the market cap weighted chart has broken to all-time highs, equal weighted chart is yet to make newer highs. This divergence suggests that the top 20 percentile contributed to most of the gains in Index. Thus, focus should be on the bottom 10 to 20 percentile of the stocks.
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Chartwatchers
Ratio of nifty midcap to nifty index
Ratio of midcap to large cap breaks above rounding bottom pattern
Source: Bloomberg, Edelweiss Wealth Research
The ratio of nifty midcap to nifty 50 has reversed indicating a risk on environment. Nifty midcap to nifty ratio has formed a rounding bottom pattern which is a long term reversal pattern. In previous two instance same pattern led to midcap outperformance over large cap for several years.
Ratio of nifty Small cap to nifty index
Ratio of small cap to nifty index on verge of breaking above reversal pattern
Source: Bloomberg, Edelweiss Wealth Research
Above is the ratio chart of nifty small cap index to nifty 50 index. An inverse head and shoulder pattern on the chart at 15 year low suggests, break above the neckline, (green line) will confirm the change of swing. Change of swing will indicate small cap outperformance over large cap.
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Chartwatchers
Risk
Nifty complete 200% extension.
Nifty completes 200% extension since its inception.
Source: Bloomberg, Edelweiss Wealth Research
The above chart shows the journey of Nifty since 1991. The above chart also draws a reference as to where the markets have made a potential top and have been sideways or have seen a correction. Whenever nifty has come closer to important Fibonacci levels such as 61.8%, 100%, 161.8% price has either taken a pause or corrected significantly.
Previous month price traded above 200% but failed to close above the same. Currently, we are in the similar situation where price is trading above 200%. Thus till we get the confirmation as per monthly closing the risk of short correction prevails. In addition to the long term target being achieved, daily chart too suggests 14700-15500 has quite a few crucial resistances for the price. The channel projection on nify daily chart as shown below has completed is close to 200% projection level at 15400.
Channel resistance and Wave equality coincides around 15200-15500
Source: Bloomberg, Edelweiss Wealth Research Moreover, as per Elliot wave theory, price is close to achieving wave equality @ 15400-15500 whereby wave 5=1 and wave ((5)) = 200% wave ((1)).
Source: Bloomberg, Edelweiss Wealth Research
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Chartwatchers
World Indices- At key Fibonacci extension level Most of the world indices are approaching key Fibonacci extension or projection levels measured from the fall of Jan’20 to Mar’20. This suggests some breathing time in world indices before it heads higher.
S&P 500 – Price reaching 138.2% extension Taiwan- Price at 161.8% extension
Source: Bloomberg, Edelweiss Wealth ResearchSource: Bloomberg, Edelweiss Wealth Research
Nikkei- Price achieves 161.8% extension level Kospi- Price close to achieving 161.8% extension
Source: Bloomberg, Edelweiss Wealth ResearchSource: Bloomberg, Edelweiss Wealth Research
Bloomberg Industrial Metal index- At multi year resistance level
Source: Bloomberg, Edelweiss Wealth Research
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Chartwatchers
Seasonal trend – Jan- Mar topping cycle
Seasonality in Nifty indicates a top in 1st quarter of the year
Source: Bloomberg, Edelweiss Wealth Research
The above chart of Nifty since its inception shows that index has entered the Jan-Mar topping cycle. The chart shows that there are 17 instances where significant tops or bottoms have been formed in the first quarter and more particularly in January.
Nifty: - Drawdown analysis Periods when nifty rallied 50% without 10% Drawdown post rallying of more than 50% correction From To Rally in % From To Drawdown in % Apr-03 Sep-03 55% Dec-03 May-04 -35.86 Sep-03 Dec-03 56% Jan-05 Feb-05 -10.65 Nifty drawdown analysis suggests Oct-05 May-06 63% Jul-06 Jul-06 -10.2 index has reached an Aug-07 Dec-07 58% Nov-08 Mar-09 -21.64 extreme Mar-09 Jun-09 84% Oct-09 Nov-09 -32 Aug-13 Mar-15 77% Sep-16 Dec-16 -31 May-20 Jan-21 67% Jan-20 ? Average rally 66% -23.6
Source: Edelweiss Wealth Research
We have analysed the data since ’99 and have collated instances where the Nifty has seen a correction of 10%. The observation concludes with an outcome of how much does an index rally post a 10% drawdown and follow up drawdown after the rise.
The outcomes suggests, on an average, Nifty has seen a rally of about 65% and post that Nifty has seen a correction of 18.50%. Currently, Nifty has seen a rally of about 65% post the drawdown of 10% in the month of Apr’20-May’20.
This suggests index has rallied to one end of the extreme and a correction or a pause is inevitable.
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Chartwatchers
Historical phase vs current phase
Source: Bloomberg, Edelweiss Wealth Research
In Technical analysis it is often remarked that “History repeats itself”. We believe this has happened this time around.
For this we will first analyse the historical period and then compare with the current period.
Index due for We are analysing the period on chart 2003-2004. correction as per previous cycle. Prior to the 100% rally in 9 months in 2003, index rallied 100% in 1999 and then was gripped in bear market for two years which started in year 2000 (dot cum bubble).
Post the rally and after completion of 5 leg up move as per Elliot wave theory ,index corrected for 5 months losing 30% from the top before marking a 4 year bottom.
Nifty current cycle
Source: Bloomberg, Edelweiss Wealth Research
Let us now look at the current period of Nifty, Index rallied 65% in 2017 and post the introduction of LTCG Nifty entered a long consolidation for 2 years followed by a sharp sell off. Midcap and Small Cap index were the ones, which were hurt the most.
Currently, nifty has moved up in 5 wave which indicates that correction is inevitable.
Looking into the previous correction and drawdown analysis shown above nifty a correction of 20%- 30% should be a strong buy for next few years.
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Chartwatchers
World Market Capitalization
World market capitalization reaches max. deviation.
Source: Bloomberg, Edelweiss Wealth Research
The above chart of world market capitalization has 200 dma on the price, and RSI on the lower panel. The World Market cap in its historical periods has seen itself reverting to mean whenever it deviates 28%-29%. Currently, world market cap has deviated 30% from its mean which signals a pullback or a pause before it resumes its upside move.
The RSI, which is a momentum indicator, is also failing to move above its previous high with market cap moving above its previous high. This divergence also puts caution to the uptrend and signals a correction.
Previous instances also give an indication that whenever there has been a run up of more than 20%, the market capitalization has always come back to test its 200 Day MA.
DOLLAR INDEX- Reaching multiple support zones.
Dollar Index reaching multiple support levels.
Source: Bloomberg, Edelweiss Wealth Research
It’s all about dollar! A fall in dollar index has led to massive inflows in Indian market. Inflow has been so strong that Indiais the only country amongst emerging countries to see inflows to the time of $21bn. The short term chart structure above suggests that dollar index is approaching crucial support levels around 88 – 87. From 2008 – 2011, there were a couple of instances where the same levels (88 – 87) were acting as stiff resistance levels. They were eventually broken in the later half of 2014 and early 2015. The same levels acted as a base when the Dollar index hit a bottom in 2018.
Technically, this type of formation is termed as “Change in Polarity”, wherein earlier resistance levels take up the role of Support levels.
A reversal in dollar index thus could pause an uptrend in Nifty.
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Chartwatchers
Dollar Index vs CFTC
CFTC short positions as record levels.
Source: Bloomberg, Edelweiss Wealth Research
Above is the chart of Dollar index on the upper panel and CFTC on the lower panel. Since 2012, tracking the CFTC Positions and the movement in Dollar Index, lets us conclude that extreme short positions have eventually led to a reversal in the Dollar Index.
We can relate the current setup to the one that we had in 2013 – 2014 and also 2017 – 2018 and the Dollar Index saw a reversal from lower levels.
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Chartwatchers
CNY vs EEM vs LMEX- reaches extreme
USD/CNY indicates a pause in EEM & LMEX
Source: Bloomberg, Edelweiss Wealth Research
The above chart has three panels. The upper panel is of Chinese yuan, the middle and lower panel are of Emerging market index and London metal index respectively. As marked on the chart USDCNY has an inverse correlation to both EEM and LMEX. Currently USDCNY (Chart below) has completed a reverse AB=CD with 18 month cycle suggesting, any reversal in this can put a halt in an uptrend of EEM and LMEX.
CNY completes AB=CD pattern target
CNY completes reverse ABCD pattern target.
Source: Bloomberg, Edelweiss Wealth Research
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Chartwatchers
USDINR – Double bottom at previous breakout zone!
USDINR – Double bottom at previous breakout zone.
Source: Bloomberg, Edelweiss Wealth Research
In line and as expected, the USDINR chart is also displaying a similar setup as observed in the Dollar Index (DXY). USDINR is trading close to the support levels of 72 – 71.75. These levels were earlier acting as resistance levels and as per the “Change in Polarity” concept, one can expect support at these levels.
CBOE Vix still above pre covid levels.
Source: Bloomberg, Edelweiss Wealth Research
Despite a rally of more than 40% in the indices, US CBOE Vix level is still above the pre covid levels which warrants a caution.
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Chartwatchers
Momentum Indicator - Percentage of member above 200dma reaches 100%
Breadth Analysis
Source: Bloomberg, Edelweiss Wealth Research
The above chart has percentage of members above 200 dma (panel 2 and panel 4) for nifty 50 (panel1) and nifty 500 (panel 3).
The observation shows whenever percentage of members above 200 dma reaches 100% on both nifty 50 and nifty 500 index tends to take a pause or correct.
Current reading of 100% indicates probability of index undergoing a correction in terms of price or time is higher.
Conclusion In the short term there are many indicators which is pointing towards a possible pause in the indices. However, we believe correction, if any, should be used to enter longs in Midcap and Small cap universe. The catalyst behind the outperformance in mid and small cap should be Dollar bear market cycle, Emerging equities breaking out of the long consolidation and Positive dievergence between Russell and CNX Midcap. Nifty should be a buy around 12800-13000.However,banknfity should outperform nifty in the medium term.
Let us now look at the sectors and stocks which one should look to for the medium term.
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Chartwatchers
Sectors Defensive vs Cyclicals
IT/PHARMA… should underperform METAL/AUTO/POWE R/REALTY etc…
Source: Bloomberg, Edelweiss Wealth Research
Above is the ratio chart of defensive vs cyclical sector. As we can observe ratio has reversed after making double top pattern. Similar reversal had occurred in past where ratio broke below the double top pattern and remain in downtrend for a brief period of time. Reversal in ratio indicates Cyclical sectors such as, Metal, Auto,cement will outperform Defensive sectors such as IT, Pharma, etc.
Nifty Realty –Coming out of huge consolidation
Nifty Realty breaking out of 10 year consolidation
Source: Bloomberg, Edelweiss Wealth Research
After having seen a massive slide since 2008 (The US Subprime crisis), the index underwent a time correction, trading in a range from 350 on the higher side and 150 on the lower side. While broader indices rallied 3x, Nifty Realty diverged against the main trend. Such an intermarket divergence gives an opportunity to play an underperformer as a Value investment. Currently, this Index is on the cusp of a breakout from a 8 year consolidation.
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Chartwatchers
Power Index (Equal weighted)
Equal weighted power index on the verge of breakout
Source: Bloomberg, Edelweiss Wealth Research
The above chart of power Index comprises of both power generation and financing stocks.Our observation is, index is on the cusp of breakout after a decade long consolidation.
Insurance Index(Equal weighted)
Insurance Index breaks above January 2020 high.
Source: Bloomberg, Edelweiss Wealth Research
The above chart of equal weighted index comprising of HDFC Life, Icici Pru life and SBI life. The index has not only managed to recoup all the losses registered during the covid fall but also it has managed to break above the high registered during the pre – covid era. This proves that the index has strong momentum going forward and is likely to remain an outperformer.
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Chartwatchers
Stocks Kalpataru Power
Buy Kalpataru power for upside of 25%- 30%.
Source: Bloomberg, Edelweiss Wealth Research
Kalpataru Power has completed a Bullish Cypher pattern which is a harmonic pattern. It suggests that the stock is trending, but it is also making sharp reversals along the way. The unique part about this pattern is that both highs (Point A & C) and lows (Point X & D) are trending higher. As per the pattern, the stock has the potential to deliver returns of 25 – 30%.
Tata Power
BUY Tata power upside of 25%-30%
Source: Bloomberg, Edelweiss Wealth Research
It’s a very rare observation where price completes time wise correction which is close to Golden ratio, 61.8%. Stock completing correction close to golden ratio as per time or price and reversing up, sets up a good bullish setup for medium to long term. Tata power stock price had an uptrend of 2801 days and down move of 4507 days which is 1.61% of up move days. Added to completion of downmove, Volume between 30-40 is highest ever which was last seen in 2004 period.
Moreover, as per reverse AB=CD pattern 100% down move from the highs of 2011 to lows of 2020 is completed.Thus confluence of golden ratio, volume and fibo extension givesenough evidence that price couldhave bottomed out for long term.
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Chartwatchers
REC Ltd.
Buy Rec for the target of 190.
Source: Tradepoint Web, Edelweiss Wealth Research
REC on the renko chart also indicates a confluence of support around 80 levels. Recently, REC has given a breakout above the trend line which was acting as a resistance since 2017.This breakout has resulted in the trend line acting as a support level. The stock has made a higher swing bottom indicating that the stock is in a firm uptrend.
Kolte Patil
Buy Kolte patil for target of 530
Source: Bloomberg, Edelweiss Wealth Research
The price chart of Kolte patil shown above is in a secular uptrend indicated by higher highs and higher lows. Stock also has a history of correcting 65% from the top. The interesting observation is, whenever stock corrects 65%. In its next upmove the stock rallies 5x. Going by this, price has potential to touch 530 on the upside.
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Chartwatchers
DLF
Dlf Breaks out of rounding bottom pattern
Source: Bloomberg, Edelweiss Wealth Research
Dlf, the major contributor on nifty realty index has broken above its 7year rounding bottom pattern. The pattern which holds a lot of significance for long term reversal. While nifty realty remains within the space of consolidation of 7years,the ratio of Dlf to nifty realty has broken above the same. This indicates stock should outperform nifty realty index.Stock has witnessed accumulation in last three months. Also, month of January has seen highest trading volume in last 10 years. Once stock crosses its supply zone of 295-305, we expect huge momentum in the stock.
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EBL and its associates, officer, directors, and employees, research analyst (including relatives) worldwide may: (a) from time to time, have long or short positions in, and buy or sell the securities thereof, of company(ies), mentioned herein or (b) be engaged in any other transaction involving such securities and earn brokerage or other compensation or act as a market maker in the financial instruments of the subject company/company(ies) discussed herein or act as advisor or lender/borrower to such company(ies) or have other potential/material conflict of interest with respect to any recommendation and related information and opinions at the time of publication of research report or at the time of public appearance. EBL may have proprietary long/short position in the above mentioned scrip(s) and therefore should be considered as interested. The views provided herein are general in nature and do not consider risk appetite or investment objective of any particular investor; readers are requested to take independent professional advice before investing. This should not be construed as invitation or solicitation to do business with EBL.
EBL or its associates may have received compensation from the subject company in the past 12 months. EBL or its associates may have managed or co-managed public offering of securities for the subject company in the past 12 months. EBL or its associates may have received compensation for investment banking or merchant banking or brokerage services from the subject company in the past 12 months. EBL or its associates may have received any compensation for products or services other than investment banking or merchant banking or brokerage services from the subject company in the past 12 months. EBL or its associates have not received any compensation or other benefits from the Subject Company or third party in connection with the research report. Research analyst or his/her relative or EBL’s associates may have financial interest in the subject company. EBL, its associates, research analyst and his/her relative may have other potential/material conflict of interest with respect to any recommendation and related information and opinions at the time of publication of research report or at the time of public appearance. Participants in foreign exchange transactions may incur risks arising from several factors, including the following: ( i) exchange rates can be volatile and are subject to large fluctuations; ( ii) the value of currencies may be affected by numerous market factors, including world and national economic, political and regulatory events, events in equity and debt markets and changes in interest rates; and (iii) currencies may be subject to devaluation or government imposed exchange controls which could affect the value of the currency. Investors in securities such as ADRs and Currency Derivatives, whose values are affected by the currency of an underlying security, effectively assume currency risk.
Research analyst has served as an officer, director or employee of subject Company: No EBL has financial interest in the subject companies: No
EBL’s Associates may have actual / beneficial ownership of 1% or more securities of the subject company at the end of the month immediately preceding the date of publication of research report. Research analyst or his/her relative has actual/beneficial ownership of 1% or more securities of the subject company at the end of the month immediately preceding the date of publication of research report: No
EBL has actual/beneficial ownership of 1% or more securities of the subject company at the end of the month immediately preceding the date of publication of research report: No Subject company may have been client during twelve months preceding the date of distribution of the research report.
There were no instances of non-compliance by EBL on any matter related to the capital markets, resulting in significant and material disciplinary action during the last three years. A graph of daily closing prices of the securities is also available at www.nseindia.com
Analyst Certification: The analyst for this report certifies that all of the views expressed in this report accurately reflect his or her personal views about the subject company or companies and its or their securities, and no part of his or her compensation was, is or will be, directly or indirectly related to specific recommendations or views expressed in this report.
Additional Disclaimer for U.S. Persons
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Disclaimer
Edelweiss is not a registered broker – dealer under the U.S. Securities Exchange Act of 1934, as amended (the“1934 act”) and under applicable state laws in the United States. In addition Edelweiss is not a registered investment adviser under the U.S. Investment Advisers Act of 1940, as amended (the "Advisers Act" and together with the 1934 Act, the "Acts), and under applicable state laws in the United States. Accordingly, in the absence of specific exemption under the Acts, any brokerage and investment services provided by Edelweiss, including the products and services described herein are not available to or intended for U.S. persons.
This report does not constitute an offer or invitation to purchase or subscribe for any securities or solicitation of any investments or investment services and/or shall not be considered as an advertisement tool. "U.S. Persons" are generally defined as a natural person, residing in the United States or any entity organized or incorporated under the laws of the United States. US Citizens living abroad may also be deemed "US Persons" under certain rules.
Transactions in securities discussed in this research report should be effected through Edelweiss Financial Services Inc.
Additional Disclaimer for U.K. Persons The contents of this research report have not been approved by an authorised person within the meaning of the Financial Services and Markets Act 2000 ("FSMA"). In the United Kingdom, this research report is being distributed only to and is directed only at (a) persons who have professional experience in matters relating to investments falling within Article 19(5) of the FSMA (Financial Promotion) Order 2005 (the “Order”); (b) persons falling within Article 49(2)(a) to (d) of the Order (including high net worth companies and unincorporated associations); and (c) any other persons to whom it may otherwise lawfully be communicated (all such persons together being referred to as “relevant persons”).
This research report must not be acted on or relied on by persons who are not relevant persons. Any investment or investment activity to which this research report relates is available only to relevant persons and will be engaged in only with relevant persons. Any person who is not a relevant person should not act or rely on this research report or any of its contents. This research report must not be distributed, published, reproduced or disclosed (in whole or in part) by recipients to any other person.
Additional Disclaimer for Canadian Persons Edelweiss is not a registered adviser or dealer under applicable Canadian securities laws nor has it obtained an exemption from the adviser and/or dealer registration requirements under such law. Accordingly, any brokerage and investment services provided by Edelweiss, including the products and services described herein, are not available to or intended for Canadian persons. This research report and its respective contents do not constitute an offer or invitation to purchase or subscribe for any securities or solicitation of any investments or investment services.
Disclosures under the provisions of SEBI (Research Analysts) Regulations 2014 (Regulations) Edelweiss Broking Limited ("EBL" or "Research Entity") is regulated by the Securities and Exchange Board of India ("SEBI") and is licensed to carry on the business of broking, depository services and related activities. The business of EBL and its associates are organized around five broad business groups – Credit including Housing and SME Finance, Commodities, Financial Markets, Asset Management and Life Insurance. There were no instances of non-compliance by EBL on any matter related to the capital markets, resulting in significant and material disciplinary action during the last three years. This research report has been prepared and distributed by Edelweiss Broking Limited ("Edelweiss") in the capacity of a Research Analyst as per Regulation 22(1) of SEBI (Research Analysts) Regulations 2014 having SEBI Registration No.INH000000172.
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