Last Updated on Apr 5, 2022 by Aradhana Gotur

This article is authored by Kunal Rambhia, a fund manager at The Streets, a private fund. He has been in the equity market since 2010, performing various roles such as Associate Research Analyst, Research Analyst, and Associate Portfolio Manager. He has media appearances with CNBC and ET NOW. Kunal is also a visiting faculty in multiple colleges.

Most of the counters are reversing from the lows and it seems the best time to accumulate quality ones at the most attractive risk-reward ratio. After browsing through the list, I could find one such attractive technical setup of HDFC AMC. Herein I share my technical analysis for the same.

Weekly price action

HDFC AMC had its dream run after listing till at end of 2019. Since then, the counter entered sideways consolidation. Recently, it fell down to previous lows and halted well. The recent low seems “inflection point” (highlighted with a green up arrow), where the yellow trendline (from previous lows) and the white trendline (the same level was tested 5 times and offered support as a change in polarity).

Weekly price action with volume

Since the end of 2019, the price is trading sideways, within the channel. The recent bounce is also from the same support zone. OBV (On Balance Volume) indicator is supporting the uptick, making clear higher tops higher bottoms, confirming bullishness with active participation.

Weekly Relative Strength Index (RSI)

A wonderful momentum indicator, RSI, is just perfectly changing its trend to an uptrend, after attempting an extremely oversold zone. Presently, the RSI is at 43 and clearly inching upward. This is in line with the support zone, which is highlighted in previous charts.

Weekly Bollinger Bands

As per Bollinger Band (BB) strategy, a breakout above the middle line of BB is about to trigger (above 2330), which can help mid-term traders to grab an opportunity for the target of 2650. Being a weekly chart, the target may take a little longer time. 

Daily Ichimoku

Ichimoku, as I discussed many times in the previous updates too, is a lagging indicator. Price has shown a clear uptick, claiming a resistance testing right onto cloud Span B line, which is coinciding with resistance trendline (highlighted with yellow line). No major positive signs are seen as per Ichimoku, but the FIRST Confirmation of a trend reversal will come on Cloud resistance breakout. Watch out for reversal signs 🙂

Daily RSI

Daily chart RSI was clearly showing bullish divergence before starting uptick. Presently, RSI is clearly above 50, inching upward, which is showing clear strength gathering in the counter. Breakout can take the counter to pretty higher levels.

Daily Supertrend

After a sizeable decline on the daily chart, the price started a sizeable uptick. The last candle triggered a buy signal on the Supertrend Indicator (red line converted into green) almost after November 2021. A ray of hope for change in trend!

Ratio chart

HDFC AMC is part of the CNX Financial Index. The ratio chart was clearly in a downtrend, which reached exactly near the previous low. Trendlines plotted on the downfall are highlighting a falling wedge, which is bullish in nature. Horizontal support and falling wedge are supporting a bullish view on the ratio chart from hereon. On the assumed uptick, HDFC AMC is likely to outperform CNX NIFTY FINANCIAL index going forward.

Putting it together

Looking at the weekly chart with trendline support and channel formation with uptrend on OBV indicator, with oversold weekly RSI gaining momentum, and daily chart’s bullish view is supported by RSI divergence gaining momentum above 50, Supertrend turning bullish with Ichimoku cloud about to confirm the first bullish sign over Cloud breakout, there seems a perfect bullish formation on the daily chart, which may offer a positional opportunity on weekly charts going forward. Weekly Bollinger Band is about to offer a mid-term opportunity too. The ratio chart is supporting a “likely” outperformance of HDFC AMC in the CNX NIFTY FINANCIAL Index.

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 in the counter. Prefer to take the advice of your financial advisor before initiating any position.

Kunal Rambhia

3 Comments

We'd love to hear your thoughts 🥰