Last Updated on Mar 29, 2023 by Anshiya Tabassum
With one more week of lackluster behavior in the market, indices remained subdued, and counters remained under pressure. Though selected side counters showed good strength, more or less, the struggle for revival continued. But as I repeatedly say, many counters are offering wonderful buying opportunities as they are available near major supports and down by 40-50% from the highs. One can eye on such counters to get the best bargain buying opportunity. One such counter is Avenue Supermarts Ltd (Dmart). Let’s dive deep into different charts and understand the formations.
Table of Contents
Weekly: Price action
Since listing, the trend of the counter was clearly bullish. It hit an all-time high by the end of 2021. Since then, the counter has entered sideways consolidation and showing time correction. Channels are placed on the price to understand support/resistance and direction. Presently price is just in sideways consolidation.
Weekly: Support and price correction
A support zone is highlighted with yellow color, where the price took resistance earlier, broke out, and opted to take support multiple times. Presently price has hit the same zone again and bounced from the lows. From the peak, the counter is down about 45% and onto the support, which is why it is worth getting shortlisted as an investment bet.
Weekly: Fibonacci level
It is the first major decline phase of the counter since its IPO. The price is making almost equal bottom (so far), nearing the previous swing low, and if we check the retracement levels, that’s just 50% of the entire previous swing. This is worth considering, especially when the counter is on multiple supports (as discussed).
Weekly: RSI
The price is near the previous low and showed resilience in going down further. The Relative Strength Indicator (RSI) is making higher bottom compared to the previous low, which is confirming bullish divergence. Bullish divergence confirms the possibility of limited downside from hereon. RSI is creating divergence near the extremely oversold zone, which is an add-on for the counter.
Weekly: MACD
Moving Average Convergence Divergence (MACD) is a lagging indicator. It confirms the trend after its emergence. Since IPO, MACD has never been to extremely low levels when the counter was trending. During the sideways consolidation, MACD went to its lowest levels and reversed. Presently, MACD has again reached the same low levels, and the price is near to previous low. There is a bright possibility of bouncing from the present zone. Confirmation of the reversal can be captured based on MACD Crossover.
Weekly: Ichimoku
Ichimoku is an equilibrium indicator and speaks about present as well as future formations. More on present terms, it is a lagging indicator that confirms the trend of the counter. An interesting observation to note is that the price is far away from the cloud, and Kijun Sen is turned more or less flat, which confirms the possibility of a price bounce from extreme lows.
The first level to watch out for is 4000 as resistance. The future cloud is equally thin, and the negative strength on the counter seems less than before. As per the indicator, the possibility of dead cat bounce is very high on the counter (and that’s right from the previous bottoms). All these observations on Ichimoku offer favorable risk-reward for positional traders as well as investors.
Weekly: ROC
ROC stands for rate of change. This is a momentum indicator that helps to understand the relative behavior of the price with the past. Since listing, a typical behavior is noticed on the counter. Whenever ROC has reached extreme lows and held onto support (highlighted with a white color trendline), it has shown a decisive bounce. Presently ROC is bouncing right from the support. Worth noticing!
Ratio chart: Nifty and Dmart
On the weekly scale, let’s look at the ratio chart of Nifty and Dmart. The ratio chart has been upward-sloping since Dmart’s IPO, which confirms the outperformance of Dmart over Nifty. Recently, this chart is in sideways consolidation. Presently, it has hit the support trendline, which has been respected well in the past. Also, the flat trendline (where the ratio chart has taken support in the recent past) is also coinciding with the same. This inflection point confirms a likely bounce (with limited possibility of downside) on the ratio chart and the outperformance of Dmart over Nifty.
Putting it all together
Looking at the monthly price trend, the support offered by the horizontal trendline along with 50% Fibonacci retracement, and bullish RSI divergence, I feel this is a good bargain buying opportunity for long-term investors and positional traders. The extremely low MACD, support over ROC, huge difference between the price and Kumo cloud on Ichimoku, and support over the ratio chart of Nifty and Dmart suggest the same. Momentum may pick up going forward.
Statutory Disclosure: Kindly note that this update is only for educational purposes. It is safe to assume that my personal position, my fund’s position, my client’s position, and my relative’s position may be open on the counter. Prefer to take the advice of your financial advisor before initiating any position.
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