Monday, October 5, 2009

United Phosphorus: Is Short-Term Bottom in Place?


I would like to assure all the readers who have provided affirmative comments regarding the issue of trading ideas on the blog, that I am not going to stop posting stock specific views based on act of particular readers. But, there would definitely be a small change in the format of my postings which will be more in the form of 'Trading Views' rather than formal 'Trading Calls or Recommendations'.

However, in short, trading views with supportive chart patterns will continue to flow as always. But, the decision of trading call based on specific signals like Entry, Exit, Stop loss , etc. will have to be determined by the traders themselves at their own peril.

This may also mean that, I may post multiple trading views generated based on supportive chart signals, at the best of my knowledge. But, traders need to FILTER these views based on their due-diligence or understanding on the matter and act only when they feel that the specific stock view is good enough to take a call for themselves. A number of trading views will keep flowing from my side, you have to choose (filter) as to which few would serve you best as per your profile.


United Phosphorus

Previous week saw an emergence of a bullish reversal indicator in United Phosphorus- 'The Morning Doji Star' Pattern. This pattern consists of determination of the trend based on performance of three candle sticks patterns which indicates that the prevailing down trend has ended and a gradual process of new up trend could be in the offing.

Charts Courtesy: www.icharts.in



The Morning Doji Star

This pattern characterizes the reversal pattern in the prevailing down trend in the counter. The 1st day of the morning star pattern signifies a long red candle indicating the last downside move preceded by several down trending days. The 2nd day is a doji which opens gap-down & closes somewhere near the very same open- indicating a tussle between bulls and the bears in search of a decisive trend. The 3rd day is the bullish confirmation day with a big white candle piercing above the mid-point of the real body of 1st day of the pattern.

In short, we have a stock in a down trend since quite some while and we get a star doji indicating that bears were in control of the downtrend but was duly followed by bulls taking some charge of the situations- meaning bears are losing capacity to drive down the stock further from here. The confirmation of this comes on the 3rd day of the pattern when bulls seems to be in full control of the situation and betting of the reversal in the stock fortunes. However, traders who want further confirmation of this reversal pattern can latch on to clues from the another 2-3 days of trading sentiment in the counter.


Supports & Resistances

Coming back to United Phosphorus and the bullish reversal pattern in this counter, we have witnessed a Morning Doji Star pattern (as marked by Blue Rectangle on above Chart) around September 24, 2009. With the positive stock performance in the following 4-5 sessions of witnessing this pattern, we can conclude that the stock could have indeed bottomed out around 154-156 zone in the near term horizon.

The stock has minor support around 163-164 zone followed by 154-156 at deeper levels. Presuming that this stock view on United Phosphorus has indeed sought a bullish reversal pattern with determination of Morning Doji Star pattern during the last week, we can come to conclusion that the stock has a strong support at 154-156 where the stock could have bottomed out in near term.

The stock has a resistance at 174-175 zone. So, a real bullish confirmation comes above 174-175 levels where traders can bet with conviction. However, the entry and exit strategy to be used for trading in this counter may vary from trader to trader depending upon their risk profile & to some extent market conditions as well. Traders are requested not to take trading calls on each and every stock view presented by me on this blog. Consider all the above views as guide posts with thoughts on the stock and its trend, rather than as a recommendation to Buy/Sell.

Note: The term ‘Trend Reversal’ could have number of implications. One of them being- the prior trend would cease to exist, not necessarily being reversed instantly. Also, a trend reversal is a slow and a gradual process which develops over a period of time with change in sentiment.

Disclaimer: All data, content and/or reports posted by Viral Rajnikant Dholakia on this site are only for information and educational purpose of visitor/readers of this blog. It does not constitute to be a recommendation/offer/advice to buy or sell assets/securities in any form. Individuals/organizations are requested to take an informed call by consulting their Financial Advisor before acting on any matter/data published on this blog. This blog does not warrant of any kind of accuracy, adequacy and completeness of data, ideas or thoughts published in it. This site and Viral Rajnikant Dholakia assumes no responsibility or liability or loss or damage of any kind/nature for your trading and investment decisions and its consequent results.

8 comments:

Vikas said...

Hi Viral

A different question altogether, WWIL is coming out with rights issue (First instalment at Rs. 9 and after allotment of shares, second instalment will be at Rs. 10) . I already have 410 shares with me at Rs. 29 . Will be alloted 446 shares additionally in Rights issue .Will it be a good startegy to apply for rights issue and average the price and sell it at higher price,as i dont see any value in long term with WWIL.

Please revert with your thought

Thanks & regards
vikas

Antriksh Patel said...

Thanks Viral,

I don't understand much about technical patterns and hence am in favor of investment opportunities. But will try to grasp things slowly and gradually. Keep it up. And please don't forget to share your knowledge on any of the investement ideas.

Keep it up. Your knowledge have remained helpful to me and lot of us.

Viral Rajnikant Dholakia said...

Dear Vikas,

The current price of WWIL is Rs.20, whereas the Right issue is been alloted at Rs.19. The price differential between the Current price and Right issue price is not substantial enough, for you to be tempted to subscribe to its Right issue.

Rather if you wish to average the stock for the purpose of exiting from the counter at higher levels, you can grab some stock around current levels with strict Stop Loss at Support levels mentioned below:

Short-term Support: Rs.19.00
Short-term Resistance: Rs.23.50

Viral Rajnikant Dholakia said...

Dear Antriksh,

I haven't lost way for long-term investors directed to the readers of this blog.

Simply put, this is not best of the time to do buying for long-term. We're over-bought (just as we were over-sold few months back) over the medium term horizon.

Valuations will become reasonable once an intermediate downtrend is established & sustained. Until then, I've kept the blog busy serving the interest of Trading fraternity with short-term views and ideas.

I hope to write on long-term views once market valuations are more reasonable than now. We don't know, when shall that happen... but patience & perseverance is the key for long investments, or else gullible investors stand the risk of being TRAPPED at higher levels.

Long term Investors can still Accumulate stocks like Alok Industries, Gitanali Gems, Videocon Industries, Kalindee Rail & Idea Cellular among Mid-caps. Bharti Airtel, Rcom, RCapital, ONGC & NTPC among Largecap stocks. These all stocks at current prices, as valuations in these stocks are not over-heated as in other counters. But, there is no GUARANTEE that these stocks will not correct in future in sync when general market goes into correction.

Vikas said...

Thanks viral for your insightful views on WWIL .

My next question to you(this is surprisingly for short term benefit) : Will it not be a good idea to purchase any Indiabulls shares for 2 reasons:
1. coming out with an IPO (IB Power on 12th oct)
2. Got the permission to launch an exchange from SEBI

Awaiting Your views

Viral Rajnikant Dholakia said...

Dear Vikas,

We have had a trading call on IBREAL stock on Sept 7 on this blog. My intentions then for giving this call was-apart from technicals even news flow based on IBPOWER IPO to be slated soon.

The stock has a Support at 260 and 242, while a resistance around 275 (already crossed) and 290. If the stock is able to cross 300 mark, this stock can rally a bit more.

Personally speaking, I would not opt to take a fresh call in IBREAL at current levels based on already discounted news flow mentioned by you.

Antriksh Patel said...

At what level should one enter Sesa Goa?

Viral Rajnikant Dholakia said...

Dear Antriksh,

You've not mentioned you want to enter Sesa Goa from what time perspective and trading horizon? or investment horizon?

From long-term perspective, Sesa Goa is expensive at current levels and no hope of valuations becoming reasonable any time soon.