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11 July 2021 | Trendline Investor | Newsletter 8 |
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Nifty ping-pong continues!Disclaimer: I am not a SEBI registered advisor and this newsletter is for educational purposes only |
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Hello <<First Name>>, Welcome to the 8th 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 how to identify Parallel channels and its significance. Hope you enjoy! Nifty continues to rest:The pause in Nifty continues for the 5th week in a row. The average daily range of Nifty over the past 14 days is hitting continuous lows and is currently at 143.23 which shows the daily average move over the last 14 days in Nifty is below 1%. The last time we saw such a low value was on the 18th Sep’20. This clearly shows that Nifty is due for a massive move which is probably just around the corner. There has been a lot of panic about the Delta variant which is causing some people to believe that a 3rd wave might lead to a market fall. Let me remind you what the markets are doing. If you look at below chart you can see that Nifty is still in an uptrend. So, whose taking the markets up? It is not you and me who are driving the markets up. It is the big money- big institutions, LIC, mutual funds who are the major investors in the markets. So, just because you and me are guessing that markets will fall, the market will NOT fall. What should you be doing then? Always go with the market flow and ride the massive uptrends that we are currently experiencing in many stocks. Such trending markets are a gift on a platter. Don’t miss it by playing the guessing game. So, in short, unless the charts don’t make a Lower low and lower high chart formation and the primary trendline support is not broken, there is no reason to be bearish and expect a market fall.
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Sector to watch out for:An interesting sector- Nifty Realty- that has not given any returns in the last 13 years and is waking up from a very long hibernation this week. This could be a highly rewarding bet in the next few years. Technically, the index is breaking out from a very significant 10+ year rectangle bottom and the probability of this sector giving multifold returns in the next few years is very high. Some of the interesting stocks from this sector would be Godrej properties, Oberoi Realty (recommended in our newsletter on 6th June), Brigade Enterprises, NBCC. Find your pick and be ready to ride this massive up-trend that is just about to start!
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Market Breadth:Stocks entering the momentum phase on long term charts have again seen a minor rise this week. This market breadth is a very key indicator for me to understand the behaviour of the underlying stocks that are traded in the market. If this indicated a strong dip week after week then I would be really worried- even if the markets were going up. However, the numbers are on the rise when the market is going sideways. This is why my bullish view is still intact. So, stay invested!
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Top 4 Stock picks for the weekStock PerformanceFor the 28 stocks recommended in the past editions, the below chart highlights the overall stock performance. As mentioned last week, 80% of your profits will come from 20% of yours stocks. So make sure you ride the big winners! Best performers: Sharda Motors up 35% JK Lakshmi Cement up 31% Kitex Garments is up 24% Nucleus Software up 14%
Worst performer:
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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. Equitas Small Finance Bank Ltd |
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| The company operated as a wholly-owned subsidiary of Equitas Holding Ltd, before acquiring a small bank license. Being new in the banking space, it has done very well in the last few years by growing its revenues 7 times since 2016. Going forward, it might not be able to grow continuously at a similar pace, but given the opportunity in India I still see some strong potential here. Technically the price went one way up until Feb’21 and since then the price has been going sideways and retested the primary trendline support this week and moved up strongly with excellent volumes. Given the strong move this week, the stock is looking good to head much higher from here for targets of 85 in the next few months and 120 in the longer run.
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2. Likhitha Infrastructure Ltd |
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| The company is in the business of Pipeline Laying for Oil & Gas Pipelines, City Gas Distribution Projects and Operation and Maintenance (O & M) Services. Being a small cap company, the company seems to be making big strides which is reflected in the Sales and profits. The company has managed to grow its Sales at a CAGR of 30% and its profits by a staggering 59% CAGR in the last 3 years. Also the Operating margins have increased from 13% in 2018 to 21% in 2021. Technically, the stock has had a one-way run up and is continuously forming higher highs and higher lows signifying a strong trend. The stock has been going sideways for the last 3 months and is just about time before it takes-off. One can buy the stock at current price for targets of 600 in the next few months.
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3. Granules India Ltd |
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| The company and its subsidiaries are primarily involved in the manufacturing and selling of Active Pharma Ingredients (APIs), Pharmaceutical Formulation Intermediates (PFIs) and Finished Dosages. The company has been in a tremendous growth phase since inception and its posted a record increase in Sales and Profits in FY’21 with a massive increase in its Operating margins from 20% in FY’20 to 26% in FY’21. Technically, the stock broke out of a 4-year long consolidation in Jan’20 and has seen a 100% increase in its stock price since then. However, the stock has been consolidating for the last 9 months and is looking interesting again this week. One can buy the stock at current price for targets of 500 in the next few months and even 700 in the next few years.
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4. Home First Finance Company India Ltd |
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| This young company operates in the financing space and is trying to change the way financing is provided. The company has been on a growing spree and has increased its Sales and its profits at a record pace in the last 3 years. Technically the stock was consolidating since it was listed in Feb’21 and has broken out from an Inverted Head and Shoulders pattern this week with significant increase in the number of shares traded in the last 3 days. One can buy the stock at current price for targets of 750 in the next few months and 1000 in the longer run.
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Trend Following Series- Parallel Channel explainedLast week we looked at the three main rules to identify the importance of a trendline. In this week’s blogpost, I have explained the significance of Parallel channel trends in stocks, how to identify them, and finally how to draw them. A key takeaway from this blogpost would be that: I hope this blogpost helps you understand the importance of stocks trending in long term parallel channels and do stay tuned for next weeks post in this series. Until then, stay safe and keep learning… Your Trendline Investor! |
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For any queries, please contact me on twitter @dmdsplyinvestor using #Asktrendlineinvestor. In case you liked my weekly newsletters, you can buy me a coffee! |
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