india fortnightly - goldilocks premium research · goldilocksresearch.com private &...

12 Dec, 2019

INDIAFORTNIGHTLY

goldilocksresearch.comPrivate & Confidential. Please see the important disclaimer at the end of this report.

Market Indices

Sensex 40412

Nifty 11910

Medium-Term Trend UP

52-Week Range 10333 - 12158

India VIX 13.38

Sector Preferences

Banking

Pharma

Oil & Gas

Stock Monitor

ICICI GENERAL INSURANCE

NESCO

PETRONET LNG

BALKRISHNA INDUSTRIES

OPPORTUNITY KNOCKS !

Consolidation phase to end soon Post the tax cut announcement in the middle of Sep 19 the markets have been trading firm and saw a gradual rise back to 12100 levels. This has played out in the backdrop of not-so-great economic newsflow and has been the big debating point. However we feel the price knows and is factoring in a lot more than we all know collectively. This correction from 12100 levels looks temporary in nature. The fall has made the studies fitter and has helped the market create a higher foundation. The medium-term chart set-up remains in great shape. Till 11700 is safe we work with a short and medium-term target of 12300 and 12700 respectively.

Patterns – Camping with the bulls

Two large bullish pattern set-ups can be spotted on the daily and weekly charts. These set-ups have developed after absorbing almost 5 months of price action and hence are unlikely to reverse in a hurry. This fall from 12100 to yesterdays low has been very gradual and there is nothing to say that it's a reversal. A close beyond 11950 should get the bulls back in action and take the index back to life highs and beyond.

ICICI General Insurance – Safe & Secure

One of the best performing stocks in its segment. Has shown spectacular relative strength for many weeks now and this trend is likely to continue. We see the stock hitting 1600 in the weeks ahead.

NESCO – Smooth Sailing

The stock has little co-relation with the mainline indices (Nifty or Mid-cap), which is a great space to be in. After many weeks of consolidationit has broken out. With limited downside, a 15-20% upmove is coming.

Petronet LNG – Stock For All Seasons

The stock has consistently made higher highs in the last many months. It has also respected the moving averages all along and created a strong base in the 250-260 area. A move to 300 and beyond is on the cards.

Balkrishna Industries – In Recovery Mode

After the big fall in the last one year where it halved in value the stock has made a good comeback. This turnaround has happened after a strong base building process. We see a run to 1025 and beyond.

For Subscribers Only

Gautam Shah (CMT, CFTe, MSTA)[email protected]


INDIA FORTNIGHTLY

WEIGHT OF EVIDENCE

We have always believed there is one pattern visible on the charts that helps us decipher the medium-term trend of the market. In today's context, we spotted a downward sloping "Channel" pattern within which the market spent almost 6 months. This looks very clean and crisp. The multiple tests at the upper and lower trendline of the patterns makes it reliable. A breakout from the same wasspotted at 11550 levels in the middle of Oct 19. We measure the distance of the top and bottom of the pattern(See Exhibit 1) and add it to the breakout point leading us to a target of 12700 over the medium-term.

PATTERN SCREENING Exhibit 1

In this week's report we highlight the MACD indicator on the weekly chart. This indicator, even though a laggard, smoothens the price action and ignores the noise. Just following this study in the last 3 years one would have been able to catch big trends. Here we present to you the weekly chart of the market. Notice how every single time since 2016 a buy signal was generated the index witnesseda run of about 5-10%. One such buy signal was spotted in late Oct 19 and continues to be in play. Note, the sell triggers have not worked as well, which is understandable as the market has been trading above the averages.

INDICATOR SCREENING Exhibit 2

The technical oscillators sometimes present a wonderful picture. Here we cover the daily 14-period Stochastic oscillator. The important take away from the chart is the fact that with just a 250 point correction from the recent high of 12150 the oscillator has moved into the oversold zone. Typically for a such a move to happen, far more price damage is seen. The oscillator also usually takes a lot of time for this journey from overbought to oversoldterritory. Now with the market "done away" with the overbought tag at 11900 levels, this study will not be a problem as the market moves to new highs.

OSCILLATOR SCREENING Exhibit 3

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INDIA FORTNIGHTLY

WEIGHT OF EVIDENCE

The talking point for the last many months has been the mid-cap segment. This is on account of the disconnect between the large-caps and the mid-caps, which has caught most people by surprise. The mid-cap index has been in a downtrend for 2 years now. Substantial price destruction has been seen in this period. Here we present a neat looking trendline that has been applicable for a while. A weekly close beyond 17200 should do the magic for the bulls and led to 18500/20000. Also notice the near perfect positive divergence on the weekly RSI indicator that makes a case for a bottom.

Mid-cap Index - Setting up for a breakout Exhibit 4

The Pharma index went through a terrible period for the last 3 years. The index lost 50% in value. This happened after a period of spectacular strength between 2009-2015. In this period the index moved from 2000 to 14000. We think this fall of the last 3 years is a correction to that period. Now as we analyse the bigger charts it can be seen that this rebound from 7000 levels has a lot of features of a possible bottom. The weekly RSI has exhibited quality divergence. The indicator has even refused to move into the oversold zone throughout the corrective period, which we think is a major positive development.

Pharma Index - Longing to go long Exhibit 5

We have been tracking Gold very closely for many months now. The commodity did nothing for a period of 5 years (2013-2018). This corrective period was after a steller run in 2009 to 2012. Early this year we spotted a breakout from a multi-year pattern at levels of 1350 $. This breakout is as clean as it can get and it tells us that a multi-month uptrend is in play. The target for this breakout comes to around 1700 $. Now the interesting part is, both equities and gold have a similar set-up and hence contrary to popular belief, we could see both these asset classes do well at the same time in the months ahead.

GOLD - Better times ahead Exhibit 6

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85Relative Strength Index (48.6790)

M A M J J A S O N D 2013 M A M J J A S O N D 2014 M A M J J A S O N D 2015 M A M J J A S O N D 2016 M A M J J A S O N D 2017 M A M J J A S O N D 2018 M A M J J A S O N D 2019 M A M J J A S O N D 2020

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GOLD [CASH] (1,459.09, 1,478.80, 1,458.45, 1,474.75, +15.2400)


INDIA FORTNIGHTLY

Entry Zone 1320-1342 Target 1600 Potential Return 20%

We like just about every stock in the Insurance space. One of the few segments in the market that has done well despite the carnage all around. Within the space this stock has one of the best set-ups

After listing in 2017 the stock was in a range for almost 18 months after which the shackles were broken for an uptrend that has carried on beautifully. The best part being, it's had no impact of the overall market

It continues to make a series of higher tops and higher bottoms not just on the daily but also on the weekly charts. A picture perfect "Ascending Triangle" pattern breakout was spotted in late Oct 19 that projects large upside targets

Needless to mention on the relative strength charts the stock continues to be in an uptrend and this is unlikely to reverse in a hurry. The recent consolidation within 1320-1400 is helping it create a higher base for the next leg up

Rock solid support seen in the 1280-1300 area. All dips towards the same should be used as a buying opportunity. If things go as per plan this stock could end up generating super normal gains in the months ahead

Support: 1315 and 1275 Resistance: 1385 and 1440.

Exhibit 1

September October November December 2005 February March April May June July August September October November December 2006

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RELIANCE ENERGY (603.000, 614.800, 596.050, 604.950, +5.70001)


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RELIANCE ENERGY (603.000, 614.800, 596.050, 604.950, +5.70001)

Exhibit 2

BUY

STRATEGY: Buy in the region of 1320-1342 with a stop loss below 1175 for a medium-term target of 1600 and 1900

Source: Goldilocks Premium Research


ICICI GENERAL INSURANCE – SAFE & SECURE

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ICICI LOMBARD GENERAL INSURANCE COMPANY (1,342.00, 1,354.90, 1,315.90, 1,339.45, -10.0500)

BUY


INDIA FORTNIGHTLY


The stock has been one of the better performers of 2019. It goes through consolidation patches for many weeks from time to time before breaking out and scaling new highs

In the middle of Nov 19 the stock broke out from a large reversal pattern that was in the making for almost 18 months. This breakout holds a lot of weightage and looks reliable on most parameters

The stock has been respecting the moving averages well during every correction of this year so far. This is usually a sign of a stock that is in a solid long-term uptrend

The "volume at price" charts suggest no overhead supply and hence it can enjoy a clean run. Most of the supply that came on account of the previous major high in 2018 could have got absorbed

The MACD study on the weekly chart has generated a fresh buy signal in the recent past. The candlestick patterns have been mostly positive with the stock registering many weekly closes at the highs

Support: 610 and 585 Resistance: 650 and 675

Exhibit 2


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RELIANCE ENERGY (603.000, 614.800, 596.050, 604.950, +5.70001)


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RELIANCE ENERGY (603.000, 614.800, 596.050, 604.950, +5.70001)

Exhibit 2

BUY

STRATEGY: Buy in the region 615-625 with a stop loss below 552 for a medium-term target of 720 and 800



NESCO – SMOOTH SAILING

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BUY


INDIA FORTNIGHTLY


The stock has one of the cleanest charts in its segment. After testing new lifetime high in late Oct 19 the stock has been in corrective/consolidation mode. The phase has lasted almost 6 weeks and is close to completion

This recent corrective phase has got all the studies away from the overbought zone. The big breakout happened in the month of Aug 19 at 250 levels which now becomes the base for many weeks and months

The weekly RSI hit a new 2-year high only recently. Also this high was just around the overbought zone giving it a lot of room to rally. With supports nearby this looks like a good time to initiate longs

The stock is one of the leading performers in the sector and moves "in its own way". It is also known to be a stock that provides a place to hide in difficult market conditions

We think the next phase of the uptrend is on the cards. So far the rally has been quite measured but in the weeks ahead the upmove could be with greater momentum

Support: 268 and 252 Resistance: 284 and 300

Exhibit 3


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RELIANCE ENERGY (603.000, 614.800, 596.050, 604.950, +5.70001)


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RELIANCE ENERGY (603.000, 614.800, 596.050, 604.950, +5.70001)

Exhibit 2

SELL




PETRONET LNG – STOCK FOR ALL SEASONS

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315PETRONET LNG (269.450, 276.950, 267.700, 275.250, +7.20001)

BUY


INDIA FORTNIGHTLY


After a steller run in 2016, 2017 and early 2018 the stock witnessed a very large correction that saw it half in value. The recovery in the last few months has been very gradual. Since the damage was so large the room to rally is equally large.

The stock seems to be undergoing a "U" shaped recovery. This should take it back to 1025 levels atleast in the next few weeks. Over the medium-term a level of 1110 can also be tested.

After a long time we see a disconnect between the price action of the stock and the Nifty. This is an important development as it tells us that the outperformance phase is coming back

A neat looking moving average crossover can been spotted on the weekly chart that should provide good support Not once in the last 5 years has the weekly RSI moved into the oversold zone. This has to be read as a very positive

development and an advance indication of the possible strength ahead. Support: 900 and 854 Resistance: 978 and 1020

Exhibit 4


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RELIANCE ENERGY (603.000, 614.800, 596.050, 604.950, +5.70001)


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RELIANCE ENERGY (603.000, 614.800, 596.050, 604.950, +5.70001)

Exhibit 2

SELL




BALKRISHNA INDSUSTRIES – IN RECOVERY MODE

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BALKRISHNA INDS (908.000, 923.750, 903.500, 916.300, +3.00000)

BUY


INDIA FORTNIGHTLY

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INDIA FORTNIGHTLY

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