7TH DEC 2023
OLECTRA (1D)
CASE STUDY- "OLECTRA"(Technical Analysis)
"The Potential Breakout Stock"
(Please read the Full Analysis and Don't miss the Key Takeaway Points)
Important Points:
Breakdown of the case study:
•As you can see in the chart(from the left side), the stock was in a gradual distribution phase with declining volumes. The price tried to bounce back and move upwards but got rejected from the initial distribution point as you can see in the chart as rejection point.
•After the rejection point, the price continued its downward journey by breaking the support levels of the base as shown in the chart but with decreasing volumes which usually means that the sellers are losing interest.
**Note: If the selling continues but with decreasing volumes with no significant rise of volumes in between then that usually means that the sellers are losing interest and there can be a reversal point in the future**
•As the distribution phase unfolded, the price went lower and lower by breaking the lows as you can see in the chart. But the distribution phase was short as there was a point of reversal on(23 Feb '23). The reversal point was confirmed when the price opened gap up in two consecutive days with massive volumes(as shown in the chart)which usually indicates the presence of strong institutional buyers. Also, the gap up areas were never filled which adds to the strength of the price from the point of reversal.
•After the point of reversal, the price rose higher and ultimately broke through the initial area of distribution/rejection point as shown in the chart. This breakout confirmed the change in the trend which was earlier in the distribution phase but got converted into an uptrend after the breakout.
•After the breakout, the price formed a shallow base and consolidated in it for(78 days) and finally broke out of it which is shown in the chart as a stage(I) breakout.
**Note: During the formation of the shallow base, the price was moving in a lower high formation while maintaining equal highs. This meant that the price was traveling in a tighter range as it moved upwards. The tighter the range, the more chances are there for a momentum burst**
•After the stage(I) breakout, the price rose higher and higher with the expansion of volumes which indicates the presence of strong institutional buyers.
•As the price rose higher, it halted for a small consolidation phase (14 days)which is also known as a Markup phase as shown in the chart. After the markup phase, the price continued to soar higher before finally reaching the buying climax point which is usually followed by a distribution/consolidation phase.
**A buying climax in a chart is a peak in buying activity, marked by a rapid increase in prices and trading volume. It often occurs after a sustained uptrend. It signifies the end of a buying accumulation phase, with smart money selling to the public.**
•As the distribution phase is unfolding, the price has retested the breakout levels of the markup phase as shown in the chart. This level was confirmed as a demand zone when the price bounced back from it with rising volumes and retested the supply zone levels.
• After the rebound, the price tried to form a base and break out of the supply zone but failed to do so ultimately leading to the breakdown of the base as shown in the chart.
•After the breakdown, the price retested the earlier demand zone levels and formed a lower wick rejection candle which is considered as a strong reversal candle. This was proved when the price bounced back again from the demand zone levels by moving higher and retesting the supply zone levels.
•As the price retested the supply zone levels, it formed a strong green candle with huge volumes as you can see in the chart. The price is currently trading inside this candle with decreasing selling volumes which usually means that the sellers are losing interest. Also, one interesting thing to note is that there has been some buying interest over the last two days which is supported by rising volumes. This buying interest will only get confirmed if the price breaches the supply zone levels and closes above it with a strong candle supported by good volumes.
•The supply zone is currently around 1315-1290 levels. The price has to sustain above this supply zone level with a good breakout candle supported by good volumes to give any strong upside momentum.
•The support zone is around 1204-1185 levels/supportive trendline/demand zone as shown in the chart. The price will be weak if it closes below these levels with good selling volumes.
Key Takeaways from this case study:
•After the initial point of reversal, the price has been moving in a higher higher/higher low structure. Forming a base and then breaking out of it with huge volumes and then sustaining above it. Until this structure is broken, the price will remain strong.
•The breakout volumes are always massive indicating that there are strong institutional buyers present in it.
•The price is currently trading in a consolidation zone but another structure is being formed known as the symmetrical triangle structure which is shown in the chart as counter trendline/supportive trendline through dashed lines.
**Counter trendline acts as a resistance level**
**Supportive trendline acts a support level**
•The price has formed as new demand zone as shown in the chart. If the prices reverses and breaks this demand zone then the price may take longer to give a good breakout.
•Also, one interesting point to note is that whenever the price hovers near the demand zone levels, the price takes solid support from it and zooms upwards supported by massive volumes. This tells us that we should have a close watch on the price whenever it hovers near the demand zone levels.
Disclaimer: This is not a BUY/SELL recommendation. The charts shared are only for EDUCATIONAL purposes
21TH JUNE 2023
SHREE CEMENTS
Position-Short 10X In F&O
Hint-SHREE CEMENTS... 25000PE @140