Month: May 2021

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Nifty Makes New High on Low Volume; Metal and Realty Stocks Outperform

Today’s Action

Nifty, +0.9%; Sensex, +1.0%; Nifty Midcap, +0.3%; Nifty Smallcap, +0.1%; Model Portfolio, -1.4%.

Market Pulse: Confirmed Uptrend

Distribution Day Count: Three

After opening on a flat note, Nifty turned negative and stayed lower for the first 30 minutes of the session. It then turned positive and the up move continued throughout the session. It closed the session near the day’s high. Nifty closed in the green for the seventh consecutive session. However, today’s volume was on the lower side. Of the Nifty50 stocks, 78% stocks closed in the green, led by Jsw Steel (+3.1%), Icici Bank (+3.1%) and Reliance Industries (+3.1%). Broader market indices underperformed the major index.

Reaction was mixed on the sectoral front. Nifty Metal (+2.1%) and Realty (+1.4%) were the top gainers. On the flip side, Nifty Media (-1.4%) and PSU Bank (-0.7%) were the top decliners. Advance-Decline ratio was in favor of advancers, as out of 2,306 traded stocks, 1,094 stocks advanced, 882 stocks declined, and remaining closed flat.

Nifty making a new high and not registering any distribution day after May 11 are positive signs for a sustainable rally. However, without trying to predict and decode stories, we will take what the market gives and continue to monitor unfolding conditions. If the index falls further, adds a distribution day, and breaches its key moving averages, we may change the market status to an Uptrend Under Pressure. Focus on quality ideas emerging out of sound bases with RS line at or near new highs while reducing exposure to stocks breaking below key support levels.

Key News

Markans Pharma’s Q4 FY21 revenue was down 1.5% y/y to Rs 330 crore. PAT surged 86% y/y to Rs 79.5 crore. 

Aurobindo Pharma announced its Q4 FY21 results. Revenue declined 2.5% y/y to Rs 6,001 crore. PAT fell 7.2% y/y to Rs 801 crore.

Recent articles :

Is Berger Paints A Long Term Leader A Good Buy Now ??

Garware Technical: A Long Term Leader of Apparel Cloth Mfg. Forming Higher Highs

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Is Berger Paints A Long Term Leader A Good Buy Now ??

Berger Paints stock has cleared a 18-week, 18% deep Consolidation Base this week. Currently, the stock is trading around just -2% away from its ideal buy price of INR 823. The stock is offering investors an opportunity to get on board at the current price.

The stock ended the week on a bullish note. It closed 1.45% up on a 159% greater volume than the 10-week average. You want to see a strong close on heavy volume like this before initiating a position. That signals institutional buying. You would also want to see the same price volume momentum to continue in the coming weeks.

The key trend lines, 10 and 40-week moving averages are at a comfortable position. The current trends of both the averages are upward and the 10-week moving average is trending above the 40-week moving average. The current price of the stock is trading around 7.26% away from the 10-week moving average.

In the last twelve months, Berger Paints I has rallied nearly 62.3% as compared to 60.8% for the Nifty500. It has a Relative Strength Rating of51. We definitely would like to see improvement in the rating. At this point we are taking a step back and focusing on the RS Line.

The Relative Strength Line of the stock is offering a lot of encouragement to investors. It has been making good progress in the last four weeks. The overall long term trend of the line is also trending upward. If Berger Paints I can maintain this outperformance, it could make sense as a CANSLIM trade.

Berger Paints I stock has strong institutional support. The Accumulation/Distribution Rating of ‘A-‘ represents heavy institutional buying over the past few weeks. Although the number of institutions holding the stock dropped in the last quarter, the number of shares held by the institutions increased at the same time.

On the earnings front, Berger Paints I has an excellent EPS Rank of 94, which indicates consistency in earnings. The earnings and sales for the stock have grown by 12% and 5%, respectively over the past three years. Its 3-years earnings stability is 5, on a 0 to 99 scale (lower the better). Over the past five years, the earnings and sales for the stock have grown by 14% and 10%, respectively. The 5-years earnings stability is 14. The return on equity for the last reported year is 24%.

The stock belongs to the industry group of Chemicals-Paints. You would still want to see some improvement in the industry group rank for the group. The current industry group rank is 68. The current price of Berger Paints is -4% off from its 52-week high price and 77% above its 52-week low price.

The stock appears on our idea lists: Trend Template – 5 Months

Recent Article:

Garware Technical: A Long Term Leader of Apparel Cloth Mfg. Forming Higher Highs

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Garware Technical: A Long Term Leader of Apparel Cloth Mfg. Forming Higher Highs

Garware Technical Fibres stock has broken out of a 9-week, 18% deep Cup With Handle Base 3-weeks ago. However, the stock is still worth watching as the current price is only 6% away from the ideal buy price of INR 2735.

The stock ended the week on a negative note. It closed -1.07% down on a 33% higher volume than the 10-week average. You want to see a strong close on heavy volume before initiating a position. That signals institutional buying. But do not conclude anything just based on this week’s action. A prudent approach would be to watch the price volume momentum in the coming trading sessions.

The key trend lines, 10 and 40-week moving averages are at a comfortable position. The current trends of both the averages are upward and the 10-week moving average is trending above the 40-week moving average. The current price of the stock is trading around 7.15 % away from the 10-week moving average.

In the last twelve months, Garware Technical Fibres has rallied nearly 96.8% as compared to 60.8% for the Nifty500. It has a Relative Strength Rating of 57. We definitely would like to see improvement in the rating. At this point we are taking a step back and focusing on the RS Line.

The Relative Strength Line of the stock is offering a lot of encouragement to investors. It has been making good progress in the last four weeks. The overall long term trend of the line is also trending upward. If Garware Technical Fibres can maintain this outperformance, it could make sense as a CANSLIM trade.

Garware Technical Fibres stock has strong institutional support. The Accumulation/Distribution Rating of ‘B+’ represents heavy institutional buying over the past few weeks. Although the shares held by institutions dropped in the last quarter, the number of institutions holding the stock increased at the same time. This shows increasing interest among the institutions.

On the earnings front, Garware Tech. Fibres has an excellent EPS Rank of 89, which indicates consistency in earnings. The earnings and sales for the stock have grown by 12% and 1%, respectively over the past three years. Its 3-years earnings stability is 6, on a 0 to 99 scale (lower the better). Over the past five years, the earnings and sales for the stock have grown by 19% and 5%, respectively. The 5-years earnings stability is 8. The return on equity for the last reported year is 20%.

The stock belongs to the industry group of Apparel-Clothing Mfg, which is exhibiting a fair amount of strength in the current market environment. The current industry group rank is 42. The current price of Garware Technical Fibres is -2% off from its 52-week high price and 123% above its 52-week low price.

The stock appears on our idea lists: Trend Template – 5 Months

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Sterlite Technologies; Watch Out For This Computer Network Co As it Races North On Heavy Volume.

Is Sonata Software a Long Term Leader A Good Buy

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Divis Labs Delivers Double-Digit Revenue and PAT Growth in Q4; Aurobindo Pharma and Narayan Hrudayalaya to Report Results Today

At 8:00 am IST, SGX Nifty Futures was trading at 15,429, compared with Nifty’s Friday close of 15,436.

Market Pulse: Confirmed Uptrend


Distribution Day Count: Three

Global stock markets: Dow30, +0.2; S&P 500, +0.1%; Nasdaq, +0.1%; Kospi, +0.1%; Nikkei, -0.8%; Shanghai Composite, -0.3%

Nifty opened around 100 points higher on Friday and traded in a relatively narrow range. It made a new all-time high of 15,469 in the trading session. Gains were predominantly due to the surge in index heavyweight Reliance Industries  (+6.0%). The broader market indices underperformed as Nifty Midcap (-0.04%) and Smallcap (-0.7%) closed in the red. The advance-decline ratio was in favor of decliners. Of the 2,040 stocks traded, 769 advanced, 1,206 declined, and the rest remained unchanged. On the sectoral front, mixed reactions were observed. Nifty PSU Bank (+0.7%) advanced the most followed by Nifty Financial Services and Nifty Metal which advanced 0.3% higher.

Last week, Nifty hit an all-time high and is currently trading 3.4% and 4.6% above its 21- and 50-DMA, respectively. We would like the index to hold its 21-DMA and/or 50-DMA and trade above that. Without trying to predict and decode stories, we will take what the market gives and continue to monitor unfolding conditions. If the index falls further, adds a distribution day, and breaches its key moving averages, we may change the market status to an Uptrend Under Pressure. Focus on quality ideas emerging out of sound bases with RS line at or near new highs while reducing exposure to stocks breaking below key support levels.

Key Results Today: Aurobindo Pharma, Panama Petrochem, Narayana Hrudayalaya, Hnywell Atmtn Ida, and others.

Key News:

Divis Laboratories (Nse) reported its Q4 FY21 results. Revenue was up 28.7% y/y to Rs 1,788 crore. PAT surged 29.3% y/y to Rs 502 crore.EBITDA was up 61.2% y/y to Rs 716.3 crore.

Bank of Baroda reported its Q4 FY21 results. NII was up 4.5% y/y to Rs 7,107 crore. The bank reported a loss of Rs 1,047 crore as against a loss of Rs 506.6 crore for the same period last year.

Affle (India) reported its Q4 FY21 results. Revenue was up 76.9% y/y to Rs 142 crore. PAT advanced 283% y/y to Rs 58.6 crore. 

Buy Watchlist: Ion Exchange India, Page Industries ,   Action Construction Equ., State Bank Of India, Ambuja Cements, Eveready Inds.(India), Varun Beverages, Colgate-Palmolive India, Sharda Cropchem, Astral, I G Petrochemicals, Berger Paints India, Icici Bank, Ramkrishna Forgings, Gujarat State Petronet, Apollo Hosps.Enterprise,  and Apollo Tricoat Tubes

Recent articles:

Break the Stereotype; Buy High, Sell Higher

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Break the Stereotype; Buy High, Sell Higher

“What seems too high in price and risky to the majority usually goes higher, and what seems low and cheap usually goes lower.” – William J. O’Neil

The ‘N’ in the CANSLIM strategy stands for either a ‘New Product,’ ‘New Management,’ ‘New High,’ or any other new factor, which could positively change the operating environment for the stock and ultimately drives its price into newer realms.

Contrary to conventional wisdom, buying low and selling high is not an easy way to make money in the stock market. In fact, it can be quite risky because in many cases, you’re buying damaged goods.

We would like to specially draw your attention to buying into new highs. Buying a stock when it is scaling new highs might seem strange and scary to many investors. About 98% of individual investors would never buy a stock that makes new highs. Buying a quality stock at a new high is buying into the emerging strength with a belief that it could prove to be the beginning of the next big move.

But, don’t buy every stock that makes a new high, make sure that the stock breaks out of a sound base pattern before it sails above the pivot, on a higher than the average volume. In addition, investing when the stock price is way too extended, say 5–7% or higher from its pivot is not ideal.

Traditionally, investors often believe that they are value investing, when they prefer to shop stocks near their 52-week lows. The idea of buying from a discount sale in a supermarket rarely applies while buying stocks. Stocks on the new-high list tend to go higher in price, while those on the new-low list tend to go lower. Good quality products are always expensive, so are the good quality stocks.

Don’t be afraid to buy a stock when it is showing supreme relative strength and sitting near highs. There is no shortage of precedents that show big market winners staging multiple breakouts during multiyear runs. Don’t be quick to say it is too late, especially if a compelling growth story is still intact.

For example, look at the chart of Central Depository Services (India). It advanced 70% in the last three months. Its ideal breakout and buy point was at an all-time high in February, and after breakout, it progressed higher making higher highs. By avoiding growth stock at all-time high with a proper base pattern and strong fundamental and technical profile, you are avoiding a multibagger stock.

Related articles:

Why the Buyer Demand Rating is a Key to Finding Great Stocks

CAN SLIM Investment Methodology

How a Rules-Based Investing System Helps?

Read our last week’s article :  Why Stocks Form a Base; Five Bullish Traits of a Healthy Base