Last Updated on Jan 9, 2023 by Anjali Chourasiya
Wishing you all a very happy new year. May the almighty bless all with lots of happiness in 2023. After a sizeable correction in recent times, markets showed good strength again and bounced back sizeable from the extreme lows. As discussed, focusing on stock-specific moves will be more beneficial and rewarding. One such counter is National Aluminium Co. Ltd, which is showing good strength from extreme lows. Let’s dive deep into the charts to understand observations on different timeframes.
Table of Contents
Monthly: Price action
Since 2000, the stock has been making higher bottoms. The yellow support trend line has only two extremes connects, but the white trend line has multiple touch points, making it more reliable. Looking at the price action, it looks more like a symmetrical triangle formation on the chart of the past 22 yrs. A bullish biased approach may turn rewarding on the counter.
Weekly: Price action and Fibonacci
The high swing of the past was with huge volumes, confirming healthy participation and good accumulation. The recent decline halted right onto the golden Fibonacci ratio of 61.8%, and the price held on to the zone for a pretty long time. The last candle is bullish engulfing, and volumes are again picking up. Worth considering counter from a positional perspective, as it offers amazing risk rewards for bulls.
Weekly: RSI
A Relative Strength Indicator (RSI) is a momentum indicator that compares the strength on the counter with its recent past. We can see that price has been making almost similar bottoms for 5-6 months, and RSI is making higher bottoms, making it a perfect bullish divergence candidate. One can keep an eye on this counter as momentum can pick up anytime.
Weekly: MACD
Moving Average Convergence Divergence (MACD) is a lagging indicator. It is turned upward after reaching extreme lows, which is not seen for a decade. The decisive uptick in MACD is creating a bullish divergence. Along with crossover, it is making a bullish counter. The crossover of the MACD line above the zero line will make it a strong bullish counter and can be taken as a long-term counter.
Weekly: Supertrend
Supertrend is a simple trend-following indicator. One can simply initiate directional trade on the crossover. Two major bullish crossovers of the last 5 yrs are highlighted where stock ended up offering more than 70% and 140%, respectively. The next crossover is about the corner, and one can certainly grab the opportunity.
Weekly: Ichimoku
Ichimoku is an equilibrium indicator and can be used in multiple ways, depending upon the requirements. One short-term approach is to focus on Tenkan – Kijun crossover. Here we can see that for a couple of weeks, the price has been consolidating in a narrow range, and so Tenkan – Kijun has come closer to each other. Any further uptick in price will confirm crossover and raise a buy alert from the mid-term perspective. (It is for mid-term because we are referring to weekly charts).
Daily: Price action and Supertrend
The broader price consolidation is clearly seen on the daily chart. Because of consolidation, the supertrend is giving frequent crossovers. The highlighted yellow trend line is the trigger point for the very short-term trend reversal. Above the resistance line, one can consider the first sign of trend reversal.
Ratio chart: National Aluminium Vs Nifty Metal
On the ratio chart, the trend seems very clearly negative. But at the same time, the ratio chart is holding onto the downward-sloping support trend line. RSI went down to extremely low levels, which it never saw in the last 7 yrs. RSI is reversing from that zone, and the last candle has been decisive enough, which confirms the temporary bottom in place. The said behaviour will confirm the likely outperformance of National Aluminium over the Nifty Metal Index.
Putting it all together
The monthly ascending triangle of more than 22 yrs, recent correction halting near 61.8% of the last advance, bullish RSI divergence and bullish MACD divergence with MACD crossover – all are making the counter attractive from a mid to long-term perspective. The supertrend pending crossover and Tenkan – Kijun crossover on Ichimoku suggest the same.
Daily chart pending breakout of the horizontal resistance line can be a good point to consider for immediate entry on the long side. The ratio chart of National Aluminum Vs Nifty Metal also confirms the counter’s “likely” outperformance. Keep watch to make the counter a portfolio counter going forward.
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
