4 July 2021 | Trendline Investor | Newsletter 7

Nifty indecisive before the result season!

Disclaimer: I am not a SEBI registered advisor and this newsletter is for educational purposes only

Hello <<First Name>>,

Welcome to the seventh edition of the Weekly Trendline Investor Newsletter. In this edition you will find the Market outlook, Sector to watch out for, Top 4 stock picks and an explanation of the three main rules to identify the importance of a trendline. Hope you enjoy!

4 days of correction before the breaks were applied on Friday:

Contrary to what I titled last week’s Newsletter “Nifty read to Fire”, the markets corrected continuously for 4 days until we had a positive close on Friday, thus saving the bulls.

In markets, everything is a probability- sometimes we are right, and sometimes we are wrong. When we are wrong, we must know how much we will lose. But when we are right, we need to ensure that we stay in the markets for as long as possible and make it BIG. We should not exit, until the markets say so.

But, you may ask how to do this? Simple! Keep following this newsletter and you will learn slowly but steadily.

So, what’s next for Nifty after Friday’s positive close?

In the Nifty daily chart, you can see that Nifty is trending in a parallel channel and was just saved by the bulls by closing above the channel. Had we closed below the channel, we could have seen a short-term downtrend towards 15400 levels.
Now that Nifty has reversed from the lower end of the channel, we might see Nifty probably heading towards my targets of 16200-300 levels. Given the results season is just a week away, I am confident we are going to see some extraordinary results from the Indian companies and this might probably take Nifty up.

If you liked this Nifty Analysis, you should subscribe to my Youtube channel where I provide a daily outlook for Nifty that should help intraday and short term Nifty traders.

Sector to watch out for:

The BankNifty index is the sector to watch out for yet again this week. Until the price does not close below the trendline support as shown in the below chart, I am bullish on Bank Nifty and I feel this might be the sector to take the markets higher.
Technically, the index has retested the trendline support again this Friday after the short term breakout on 25th June. Also, the green candle right on the trendline support indicates that the trend is still up.

Market Breadth:

Stocks entering the momentum phase on long term charts have seen a minor rise after a minor drop for the last 2 weeks.
This clearly shows that the market breadth is very strong. We haven’t seen a major drop since weeks now.
Also, the small cap index made a fresh 52wk high while Nifty was complacent. This also indicates that the market breadth is strong.

Top 4 Stock picks for the week

Stock Performance

For the 24 stocks recommended in the past editions, the below chart highlights the overall stock performance. As can be seen, the Pareto principle applies here as well- 80% of your profits will come from 20% of yours stocks- not every stock is a performer. That’s why its important to ride the big winners!

Best performers:
- Sharda Motors up 41%
- Nucleus Software up 23%
- JK Lakshmi Cement up 20%
- Finolex Cables up 15%
Worst performers:
- Repco Home Finance & KEC down 6%

For past recommendations, stock performance and trailing stop loss updates, please refer to this sheet. You will also find some interesting FAQs that will guide you how to allocate your money to the stocks recommended.

1. Bayer CropScience Ltd

The company is engaged in Agro chemical business which primarily includes manufacturing, sales and distribution of agrochemical products and corn seeds.
The company has been posting excellent numbers and has managed to grow its Sales and Profit at 16% and 18% CAGR for the last 2 years respectively. The operating margins have improved from 15% to 20% in the last 2 years.
Technically, the stock gave a strong breakout in May'20 and has been consolidating for the last year. The stock has again started to show a pick up in volumes and had a good closing in June’20.
One can buy the stock at current price for targets of 8000 in the next 1 year and 10000 in the coming years

2. CCL Products (India) Ltd

The company is the world's largest private label coffee manufacturer with plants in India, Vietnam and Switzerland and produces 250+ blends of Instant coffee for leading global coffee manufacturers in 90+ countries.
The company fundamentals look very good overall and has grown its Sales and Profits at a CAGR of 13% and 22% in the last 10 years and posted its highest EPS this year at Rs.13.70.
Technically the stock gave a strong breakout in May'21 with monstrous volumes and consolidated the entire June’21.
The stock has given a short term breakout again this Friday and looks set to head higher towards 500+ in the next few months and 750+ levels in the long run.

3. CRISIL Ltd

CRISIL Ltd is a globally diversified analytical Company providing ratings, research, risk and policy advisory services and India’s leading ratings agency.
Fundamentally, the company’s Sales and Revenue have been stable over the years and have been growing at a CAGR of 6% in the last 3 years. With the economies opening up in the US and in India, expect Crisil to do well in the coming years.
Technically, the stock has been trending in a parallel channel and completed a 6.5 year time and price correction towards the lower end of the channel during the COVID crash.
One can look to buy the stock at current price for target of 3500 in the next 1 year and 5000 in the longer run.

4. Gokul Agro Resources Ltd

Gokul Agro Resources is engaged in the business of Manufacturing & Trading of Edible & Non-Edible Oil, Meals and other Agro Products.
Being a small cap company, the company has been posting excellent Sales and Profits. The company grew its Sales by 50% and its profits by 150% year-on-year. The debt decreased from 260 to 180 cr this year.
Technically the stock broke out in May'21 with massive volumes and has been going sideways for the last 4 weeks and is looking good to continue the momentum upwards.
One can buy the stock at current price for targets of 55 in the short term and levels of 80 in the coming years.

Trend Following Series- Demand & Supply explained

Last week I explained how to use trendlines to identify changes in stock trends. This week we will look at the three main rules to identify the importance of a trendline.

Rule 1: Time Period of the Trendline
Rule 2: Number of Touchpoints
Rule 3: Angle of the Trendline

I have provided a detailed explanation of each of these rules by taking the examples of Nifty and Aarti Drugs charts, in this week’s blogpost.

While you apply these 3 key rules to identify the significance of trendlines this week, I will be preparing to take you through some more aspects of trendlines next week.

Until then, stay safe and keep learning…

Your Trendline Investor!

For any queries, please contact me on twitter @dmdsplyinvestor using #Asktrendlineinvestor.

In case you liked my weekly newsletters, you can buy me a coffee!

Buy me a coffee

Want to change how you receive these emails?
You can update your preferences or unsubscribe