Trading Opportunity with Reliance RLP merger

Reliance RLP merger

Now after this news of Reliance RPL merger , the chances that one can expect a good bounce in these two shares is quite high , especially RPL .

Both the stocks are almost near there monthly support points and we can expect them to bounce back on monday with gap up is quite high and its possible that they break out of there resistance levels , that would be a good indication to go long these stocks .

Lets see both stocks one by one with there 3 months daily chart . click charts to enlarge .
Reliance




If you see the charts there is this upward trend line with support and the stock has actually bounced back a bit from that support point , Though it was in itself a buy signal , now it becomes a more stronger buy signal after this news. So What can be the strategy for this stock to trade .

Strategy :

wait for 15 min on monday , let dust settle and if stock moves up , then go long with SL at 1260 (support line) , better if you can wait for a dip and then buy it .

Dont just jump to go long soon after market opens up , wait for it to settle down , it may happen that it opens too up and then moves down again . Better to wait for 10-15 min first . this is the thing you should always do .


RPL



You can see the support line at Rs 76 , where this stock currently is closed at . After this news , if it opens higher on monday , which has higher chances of happening , go long after 15 min on monday , better to wait for a small dip and then go long . You can also see lower than average volumes for last month when stock was nearing the support , which is also in favour of going long .

Strategy

If stock opens at same levels of 76-80 , go long with SL of Rs 70 (earlier support) .
If stocks open above Rs 80 , you can use SL of Rs 76 (near term support) .

You should not prematurely exit the trade with small profits , better to have 2 targets and book partial profits at first target and hold the another one .

How can we trade this with options (only for people who understand options and have experiance) ?

Reliance and RPL :

Its only advisable for risky traders ,. You can buy at the money call, If stocks do not move in 2 day , get out . If they start moving up , then hold it with SL of buy price and then keep moving your SL after every 10% profit . It depends on your risk profile .

If stocks do not move then there can be chances of big loss , so better to very disciplined with your SL . and use it once trade is not in your favour .

What is the learning ?

The stocks were already near there support levels , and with news like this it becomes a great opportunity to go long on these scrips . But dont forget to see overall market trend and direction , Overall long term market direction is Down and its expected soon , so with some decent profits , get out and dont over carry the position because of Greed .
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Trading Opportunity with Jaiprakash Associates

Let us try to read what Jaiprakash Associates Charts says .

I can see some good trading opportunity with Jaiprakash Associates .

First lets look at long term daily chart for 18 months . Click on the charts to enlarge it .


You can see the it was in downtrend in between and then from last 6 months its moving sideways and its making symmetrical triangle , Its a kind of trading channel which is contracting , which means bulls and bears both are trying hard to win . once its crosses up or down , it will get some direction up or down

You can see clearly how strong is the resistance at upside (see the sliding line at the top , price touch that and reverse , so every time prices approach that area , there will be lots of sellers at the point and you should expect prices to fall again )

. This is the view from high . Let us now take a look from little near , Lets see its 6 moths charts to get a closer look .


You can see two view here , at 6 months level , you can see prices move into a contracting range.

When you see prices for last 1 month , you can see that its moving in a channel like a rectangle , so once it moves out of smaller rectagle , it should speed up the direction and then find support or resistance as the case may be .

What can be the trading strategy for Jaiprakash Associates from this point onwards ?

If you see the price channel , you can see that its 65 - 78 , and the broader channel price is again contracting and is around 60-80 in coming days . So long term and short term ranges are same . So the move below 60 should break it further and prices above 80 should give it strong strength .

So a simple strategy can be :

Buy above 80 with SL of 78
Sell below 61 with SL of 64

Remember : Dont forget for see overall markets directions , Markets sentiments should be in sync with the strategy . Also see volumes , if the breakdown below 60 or breakup above 80 is with below average volumes , be suspect for the moves .

Make sure you put Stops very strictly and follow it once its touched without any emotions and hope . you should respect SL more than your profits , you can go easy with profits , but never with SL .
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GOLD Breaks out from its Trading Range

Update (4:39 Pm , 19/02/2009) : Gold has been moving up and up and made news high with strong volumes , Any dip can be used for fresh buying .

GOLD has been moving into a trading range from Apr 2008 last year . It was moving in range 1140 - 1380 for almost an year . It touched 1380 levels trice . But recently It has broke out from that trading range and currently trading around 1480 levels .

Below is a 2 yrs , weekly chart of GOLD . You can see some indicators which also support the break out like OBV and MACD , Both of them are rising which tells that move is strong . Volumes in Feb are better than Nov , Dec and Jan which again supports the move .


Click on the chart to enlarge .
What are the other factors supporting the GOLD price to upside ?

The biggest thing is that it has moved out of its trading range , The other factor can be that Equity markets are still uncertain in near future (4-5 months) . Bad budget along with bad global clues and coming Elections will also contribute to the uncertainty in Equity markets . GOLD having safe reputation and inverse correlation with Equity will be a small plus point .

What should investors do ?

Anyone who wants to invest in GOLD can invest in GOLD ETF's . Wait for a small dip in GOLD and once it starts rising buy it at that point .A small down move is expected , after which it should again start its up move .

What is the Target price and Stop Loss for GOLD ?

Target : The Target for GOLD can be the Support point + The Height of the Range = 1380 + 240 = 1620 .

Stop Loss : SL should be 10-15 points down from the Support levels .

What if GOLD does not move up ?

What I have shown is simple technical analysis . TA is nothing but analysing something and making an opinion with high probabilities .So it can fail . But there good chances that it will not . If it does , then we have to accept that it was a failed breakout . Analysis was correct but this time markets didn't want us to make some profits ;) . It happens !! . The only thing you have to remember is that the reward from this trade can be much more compared to the amount you are risking .

Understand , we are making a good trade . It can be loosing one . Making a non-profitable trade is perfectly fine in long run , if it was properly studied .

Some Lessons and Learnings

What Does Breakout Mean ?

Break out means coming out of the trading Range on the upside . When it breaks from downside , its called Break down , In any case , further movement should be expected . Read it here

What are OBV and MACD ?

They are indicators which gives some indications and confirmations about the movement . Once breakout happens , we confirm the movement with Indicators . Read more about OBV and MACD on your own , thanks :)


Disclaimer : I hold 10 units of GOLD ETF's bought around 1220 levels from last 9-10 months .
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RELIANCE in a Trading Range

I am discussing here a simple Technical Analysis example . Here we will see opportunity for buying or selling in Reliance .

For last 3-4 months reliance is Trading in a range , This range is getting contracted day by day , We try to make a trading range Area for it , buy joining two consecutive Highs and And lows . You can see that this line at up and bottom is acting as support and resistance levels for Reliance .

Click Image to Enlarge ...




You can see the live chart here

Once Reliance breaks up or down of this Channel it will take a direction . If reliance Breaks up of this Channel , then its a Buy signal , If it breaks down this channel then its a SELL signal . Inside this , Better not to trade for a long move .

Understand that what ever i talked should not be taken as a word on stone , But probability wise , we have better chances .

At the bottom you can see Two indicators RSI and SLOW Stocastics . If someone want to trade Reliance for short period , He can sell RELIANCE once Blue line crosses Red line in down direction for the second indicator . That will signal that Buyers have taken control over sellers .

This is a simple analysis of a stock using Technical Analysis . Understand that Technical Analysis gives you some idea about what can happen , Its not the confirmation ever . You should always be ready to be proved wrong and use proper Stop loss placed and ready to take losses once your are proven wrong.
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Investing in RPL in FEB 2009

Ronak asks :

I am planning to invest around 1-2 Lakh Rs to buy RPL shares. At the current rate @83, do you think I should go ahead and buy some shares? like 500-700? or should I wait for sometime to lower the rate?

My Ans :

Hi Ronak

By seeing the charts i can see that its in a trading range of 70-93 , 70 is the support level . and 95 is a resistance level . see its 1 year chart



The price is below its 50 Day moving average , so it is still in downtrend .

Long term low of this share is around 65 , so looks like its very difficult to fall below this .

With markets still unpredictable in short-medium term , the share is expected to dance in this same range of 70-95 .

So the best idea would be to buy it either at support level prices of 70-75 , or after it breaks up from 100 levels . the best thing i would suggest it to invest your 25% money near 70-75 levels .

I hope you got what your wanted . Better we discuss things like this on a mail or i would run a separate blog for this kind of analysis . Understand that the small analysis i gave you is purely technical and not fundamental . it is only indicative and probable .

Learnings

Before investing in a share , looks for its resitance and supports levels (Read about Support and Resistance) and its range , Seeing this small thing can help you to make better investments.


Manish
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