Last Updated on Jan 17, 2022 by Aradhana Gotur
This article is authored by Kunal Rambhia, a fund manager at The Streets. 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.
Friends, herein I share my technical view on NMDC.
Monthly Chart: Consolidation and Volume activity
Since 2012, NMDC has remained within broader consolidation. So far, 121 mth consolidation is highlighted on the chart. Entire consolidation is seen as a broader curve formation. As the curve is nearing the end, the judgement of the same can be taken from volume activity (highest monthly volumes since the inception of the stock). This is the time to look at the counter positionally.
Monthly Line chart with Wolfe wave formation
Wolfe wave study has price and time predictive capacity. Though one needs to remember the probability while dealing with predictability theories. As per the structure, the Wolfe wave has 5 touchpoints. Decent volumes are confirming wave 5 being over. Trendline 1-4 decides the target and convergence of trendlines decides timeframe. External price plotting, inside plotting and breakout of falling wedge, all confirms Wolfe wave pattern presence. The structure here is highlighting a target of 265 in 2 yrs.
Weekly chart with price action, Fibonacci and RSI
After a massive runup in recent times, price retraced back to lower zones. The decline halted exactly at the 61.8% retracement level of the last swing. A smaller down channel is seen nearing end. RSI has been consolidating during the channel formation and is now crossing 50 on upside, showing that the counter is gaining strength. The entire set up on a weekly timeframe is very encouraging.
Ratio chart of Metal index and NMDC
Ratio chart is clearly forming a rising wedge and the price seems to be losing momentum. RSI is also showing negative divergence alongside rising wedge, highlighting the possibility of chart weakness going forward.
Ratio chart being weak highlights possible outperformance by NMDC over the Metal index going forward. One should wait for the breakdown confirmation to confirm the final judgement.
Daily chart with price action
On the daily chart, falling wedge formation is seen. The first confirmation has been on the pattern breakout. One can eye on final confirmation above horizontal resistance breakout zone of 150.
Putting it all together
Monthly broader price consolidation, positional Wolfe wave formation with volume activity, weekly price action with the Fibonacci retracement of 61.8% with consolidating RSI and daily chart with falling wedge pattern; all observations are highlighting good time waiting for the counter. Ratio chart is highlighting possible outperformance compared to the Metal index. Kindly note that the observation is taken on a higher timeframe and so a positional approach is must.
Statutory Disclosure: Kindly note that this update is only for educational purpose. It is safe to assume that my personal position, my fund’s position, and my client’s, as well as relative’s position, may be open in the counter. Prefer to take the advice of your financial advisor before initiating any position.