Last Updated on Oct 18, 2022 by Aradhana Gotur
A stock-specific approach in the market works really well. During a boom, we can capture the ongoing trend of the stocks, and we can buy near bottoms (consolidation) during the correction phase of the market. Likewise, here is a stock that’s giving a good accumulation opportunity after the recent run-up. That counter is Ambuja Cement.
Let’s do a quick technical analysis of Ambuja Cement to understand set-ups.
Table of Contents
Weekly: Price action and trend line
This is the weekly chart of Ambuja. The trend is clearly strong and continuing up. The most recent run-up in the counter broke above the longest resistance trend line from 2008. After making the massive high, it’s so far retesting the breakout zone and consolidating near the same. Worth looking counter from a risk-reward perspective.
Weekly: Ichimoku
You can see a sizeable run-up in the counter and a pause on the charts. And the pause is right onto Tenkan Sen & Kijun Sen conjunction. Both the short-term trend indicators are clearly up. Future cloud is also broadening and that confirms the possibility of a trend remaining bullish even in the time to come. This dip can be considered a buying opportunity from a positional perspective.
Daily: Price action and trend lines
On the daily chart, the recent decline is showing sideways consolidation. After connecting the most recent tops and bottoms, a symmetrical triangle seems to be in place. After the recent run-up, this symmetrical triangle can also be read as the ‘Flag and Pennant’ formation. This bullish formation is encouraging to buy near support from a favourable risk-reward perspective. One can even buy on break out for momentum catch-up.
Daily: Fibonacci
The recent consolidation after the massive run-up is just hovering between 38.2% to 50%. In Fibonacci, this zone is considered a healthy correction. Even the trend line support is also near the 50% consolidation. These multiple confirmations are making the counter even more attractive.
Daily: Relative Strenght Index (RSI)
RSI is a momentum indicator. In the most recent correction, the RSI came down from the overbought zone and hovered near 50. Where the RSI is making lower bottoms, Prize is near to the support and making higher bottoms. This particular information is known as the hidden bullish divergence. Any uptick from the present level will pull the RSI again from the 50 mark and make the counter attractive.
Daily: Ichimoku
Just as we discussed the Ichimoku formation on the weekly charts, almost a similar formation is seen on the daily charts. Price is near to Tenkan Sen & Kijun Sen support zone and the future cloud is widening comfortably. The Sankou Span B is flat, showing strong support for the price and that’s making the counter worth buying near support.
Daily: Supertrend
Since April, the counter initially remained sideways with a bullish bias and then entered a run-up. The Supertrend clearly offered good support (price remaining above super trend). The most recent price correction also halted the same Supertrend. Looking at the historical data it seems that Supertrend may again offer fantastic support to the counter. Risk reward looks very favourable for positional traders.
Ratio chart of Ambuja and ACC
Ambuja and ACC were constantly performing in line with each other since 2014. Lately, due to news updates, Ambuja has outperformed ACC in a big way. Ratio Chart is still upward sloping and showing good strength. Ambuja’s outperformance is likely to continue.
Ratio chart of Ambuja and Nifty
The formations on the ratio chart of Ambuja and Nifty are just similar to the previous Price Action chart of Ambuja. After a rally, sideways consolidation is seen on the ratio chart, which is forming a symmetrical triangle. After a massive rally, this also looks like the Pennant formation. The break out of this chart will confirm the outperformance of Ambuja over Nifty again.
Ratio chart of Ambuja and Adani Enterprises
Adani Enterprises has clearly outperformed the entire market and Ambuja is not an exception. But if we look at the ratio chart of Ambuja and Adani Enterprises, it is forming a following wedge. This pattern is bullish in nature. The breakout of this pattern is seen on the chart. There is a possible outperformance of Ambuja Cement over Adani Enterprises for the short- to mid-term.
Putting it all together
Looking at the weekly chart with massive buying strength and trend line support, weekly Ichimoku set-up support offered by Tenkan & Kijun conjunction and positive future cloud, the counter looks very attractive. The daily chart formation of symmetrical/Pennant, daily timeframe price consolidation between 38.2% and 50% retracement of Fibonacci levels, and hidden bullish divergence on RSI of the daily chart also suggest the same. Finally, the Tenkan & Kijun support from Ichimoku on the daily chart along with super trend support is making the counter very attractive. Ratio charts of Ambuja and ACC, Ambuja and Nifty and Ambuja and Adani Enterprises are also suggesting likely outperformance of Ambuja in the time to come. One can look at the counter from a mid-to-positional perspective.
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 in the counter. Prefer to take the advice of your financial advisor before initiating any position.
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