Last Updated on Apr 20, 2022 by Aradhana Gotur
Today’s counter under study is from the sector, which is the talk of the town. The solar industry is considered to be the theme of investment due to the green revolution. I am going to discuss the technical view on SW Solar (Sterling and Wilson Solar) that has grabbed the eyes of Reliance Group too. Most of the charts are on a higher timeframe due to the positional view on the counter.
Table of Contents
Weekly: Correction depth
Since its IPO listing, the counter saw a steep correction. From then on, price action remains muted. Price action is upward sloping in nature and making higher tops and higher bottoms since April 2020. An interesting fact to notice is that while making a higher bottom, when the price came down, it showed a depth of approximately 35% from the peak. The most recent correction was a little more dip (42%) because of the extended swing high of the recent past. We can consider this price action as mean reversion and this can offer a good opportunity to accumulate counter with a favourable risk-reward ratio.
Weekly: Price action
A very clear trend is highlighted with the blue trendline, which offered support almost 6 times in the last 2 yrs. The white line is offering support with a change in polarity. Breakout of the down-channel, highlighted with a yellow channel, is very much visible. Summing up, the price seems in a perfect uptrend and the recent breakout of the channel is showing a good momentum opportunity.
Weekly: Price action with volumes – Dow Theory
Entire price action, since IPO time, is taken into consideration. Observation is that every advance is with a sizable volume. That is highlighted with yellow boxes. Volumes are clearly higher during advances compared to declines, which is supporting a clear uptrend as per “Dow Theory”.
Weekly: Fibonacci Golden Ratio
A clear higher top and higher bottom 🙂 The interesting part to notice is that the 330 zone seems a perfect level, earlier acted as resistance and now acting as support under ‘change in polarity’ (as discussed earlier). This zone is coinciding with the Fibonacci support level of 61.8%. Bounce from that zone is sizable with good participation (highlighted in other charts).
In the recent uptrend, RSI was supporting the uptrend absolutely well. Strength went to extremes during Oct-Nov 2021. Though RSI moved down after that, but price trend remained positive. This uptrend in price and minor downtrend in RSI ended up making “Bullish Hidden divergence” on the chart. It still seems worth considering a ‘bargain buy’ at present levels.
Daily chart: MACD
MACD is a lagging indicator, which confirms the trend. MACD crossover, followed by zero-line crossover and continuation, is confirming that a strong trend has emerged on the daily chart. It is a perfect trending counter and one can certainly consider adding on every decline.
Putting it all together
By mainly focusing on price action on the weekly chart with trendlines, volume action, Fibonacci retracement alongside trendline support, bullish hidden divergence on RSI and MACD on the daily chart, it is very much clear that the stock is poised for a trend continuation and momentum is likely to emerge. One can keep watch with a positional mindset on the counter.
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 at the counter. Prefer to take the advice of your financial advisor before initiating any position.
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