Last Updated on Jan 27, 2023 by Anshiya Tabassum
It’s been almost two weeks, and the markets are in sideways consolidation. Counter-specific moves have continued decently. A couple of underperforming counters have really outperformed, and a few good names have reached the best support zone. Herein I share my view on Bajaj Finance, which is offering the best risk-reward ratio for the longs.
Table of Contents
Monthly: Trend
It’s been almost 12 yrs, and Bajaj finance has clearly made higher tops and higher bottoms. Since 2010, the discount is giving decent respect to the trend line, which offers support. The ongoing monthly candle has also touched the same support trend line. As this counter has respected the same trend line for 12 yrs, it makes sense to find buying opportunities as it has again reached the same support trend line.
Monthly: Trend with Fibonacci
The first rally on the counter was witnessed between 2010 to 2013. Retracement halted at 38.2%, which was alongside trend line support. The next healthy retracement was noticed during 2020, which again halted at a 61.8% golden retracement level, which was alongside the same trend line. The recent (ongoing correction) has reached a 38.2% healthy retracement level, which is again coinciding with the same trend line. It’s worth considering the zone to find buying opportunities.
Weekly: Trendline
After connecting multiple tops and bottoms, a trend line is detected, which acts as the best support/resistance line. This is the change in polarity characteristic of a trend line, which has been proven seven times so far. The ongoing candle is turning bullish on day 1 of the week. Worth keeping an eye out for a reversal trade.
Weekly: RSI + Fibonacci + Bollinger bands
The recent correction (if compared with the immediately preceding positive rally) has taken minor support at 78.6%. Confirmation of the support will come with at least one bullish candle. The Relative Strength Indicator (RSI) has reached near the extreme oversold zone. RSI has taken support multiple times from the same zone, so we keep our fingers crossed for the present time too. Bollinger Bands have widened, confirming increasing volatility. Candle got plotted outside the band, followed by inside the band, which increases the possibility of mean reversion till the midline of bands. Considering all observations, the counter seems perfectly poised for a decent uptrend soon.
Weekly: Ichimoku
Ichimoku, as I always mention, is an equilibrium indicator. There are many ways to study this indicator, one of them being Kumo Cloud. This serves as an area of support and resistance. We can see the price crossed the cloud on the lower side, but it isn’t decisive, and the price is hovering in the same zone. The future cloud is still bullish despite the recent decline. This is giving a ray of hope for support being held upon and reversal to begin soon.
Daily: Ichimoku
On the daily chart, RSI has reached an extreme lower zone. Multiple times, it has taken support from the same zone. Price is decisively below all signs of Ichimoku. The interesting observation to note here is that the future cloud has widened a bit compared to the past thickness. The difference between Tenkan Sen & Kijun Sen has also widened on the daily chart. Mean reversion (dead cat bounce) is at least likely from the present zone. Looking at the higher timeframe charts, it seems that the expected dead cat bounce on the daily chart may turn the first bullish sign for the positional trade.
Ratio chart: Bajaj finance Vs FinNifty
For the whole year of 2022, Bajaj Finance underperformed FinNifty. But when we look at the ratio chart, a couple of interesting observations are seen. The ongoing ratio is halted at the same line as it was during 2021. RSI has reached an extremely low level in its entire history, suggesting a pullback rally (if not a decisive reversal). At the same time, the ratio chart has halted at the support trend line, which is highlighted with the white color. The present decline is halted at the 88.6% retracement level of Fibonacci. All observations are aligning together, confirming the bright possibility of reversal from the present zone.
Putting it all together
Looking at the monthly trend line support with 38.2% retracement, weekly 2-yr old trendline with multiple changes in polarity confirmations, weekly 78.6% Fibonacci retracement with RSI near extreme oversold zone and Bollinger band mean reversion, all observations suggest bright possibilities of counter bottoming out from a present zone. The bullish weekly Ichimoku future cloud and daily extremely oversold RSI and Ichimoku mean reversion suggest the same.
The ratio chart also supports the same view based on the previous low, oversold RSI, and 88.6% Fibonacci, as well as trend line support. One can certainly consider this counter for a long-term bet.
Statutory Disclosure: Kindly note that this update is only for educational purposes. It is safe to assume that my personal position, my fund’s position, my client’s position, and my relative’s position may be open on the counter. Prefer to take the advice of your financial advisor before initiating any position.
- Avenue Supermarts: Is Dmart Providing Shopping Opportunities for Portfolios? - Mar 29, 2023
- GMR Airport Infra: Counter on Runway To Fly Soon! - Mar 21, 2023
- SW Solar: Is The Counter A Good Bet From Long-Term Perspective? - Mar 14, 2023
