My recent learnings in identifying structural stories.
Stocks that have a structural story seem to move in parallel channels on weekly and/or daily charts ever since they turnaround or breakout from a base.
Attaching a few charts here that have moved in parallel channels in the past; currently still in parallel channels ( the likes of Polycab, Godawari power, Ncc, Precot, Time Technoplast, Stride Pharma, Shaily, Kilburn Engineering and 20 microns)
In this chart you can see even during the IT raid news the stock didnt breach the lower channel, rather reversed from it. Technical analysis can help us overcome such grey “” situations in investing where we do not know the impact of the development. The stock has been in the channel ever since it broke out from the base at 1162.
Stock again has been in a channel since double bottom breakout at 300. Current overhang of falling iron ore prices, government retrospective royalties and subdued demand from china have compelled the stock to retest the lower channel. A lot of times clarity comes in news after the stock has plummeted 15-20%, so we can use such technicals to exit a stock totally or partially or even enter as the stoploss would be very small if we have conviction in the business. Its a make or break level for the stock as its a previous gap up area as well.
This has been a huge winner; almost 10x; and still in the channel. Promoters target 500cr revenue in FY25 and have issued warrants recently but valuations are quite stretched.
It has run up more than 3x and the valuations are still cheap in this market with the company growing at 18-20%.
Order book is still growing after such a good runup.
and some that have started to move that can potentially be good winners (the likes of Wockhardt, Patanjali (on daily charts) and Oriental aromatics ltd).
This one seems to have turned around with very good q1FY25 results. Management is guiding for good follow on quarters. Concalls are interesting.
Patanjali is in a very early stage and yet to be determined wether it stays in the channel. Broke out from a double bottom base and Vcp on weekly charts as well ever since it topped out in June 2020.
Again moving in a channel since breakout at 240-250 levels. It has recently formed a smaller channel on daily charts as well.
Trying to find patterns to identify structural stories early by charts.
These patterns could last much longer even after a few names already up 2-3x. The idea is to identify low risk entry near the lower channel in stocks where we couldn’t enter earlier and still find enough future runway OR exit at the upper channel if we want to book some profit/exit entirely which again is an individual call according to one’s understanding of the business.
A break of the channel on either side; on upper side of channel could give a frothy move while on the lower side of channel could be a potential breakdown, should be monitored.
| Subscribe To Our Free Newsletter |
