Last week Goldman Sachs published a report titles “The Rise of Affluent India” which estimates that the affluent population in India is set to reach 100 million by 2027. The report also highlighted 8 stocks which might benefit from this. They have their fundamental reasons for believing why these stocks might do very well in time to come. I thought why not look at these stocks from TA perspective as well.
First, here are the stocks mentioned in the report.
- Titan
- Apollo Hospitals
- Phoenix Mills
- MakeMyTrip
- Zomato
- Devyani International
- Sapphire Foods
- Eicher Motors
IMPORTANT:
- I have used weekly or higher timeframes for the analysis since this is a long term play.
- Do not expect this analysis to give you any straight buy/sell recommendations. This post is meant for education purpose and just intends to take a look at said stocks from technical perspective.
Now that we’re done with the small talk, let’s dive into the individual stocks.
Titan
An interesting observation first – Titan has never really traded below 200 WMA (weekly moving average) since the beginning and has touched it only a few times. Every time it touched 200 WMA, it gave a ballistic move. Last two times, this also coincided with a RSI reading <= 30 as shown in the chart below.
This essentially means that price around 200 WMA and a RSI reading around 30 has historically been an excellent place to buy. Previous two times, the stock has given returns around 350% returns if we consider the move from 200 WMA to the highest price before hitting 200 WMA again.
Right now, RSI is in overbought zone but as we can see in the chart above, it has previously gone much above the current RSI reading. However, in the chart below we can see a multi-year negative divergence forming between price and RSI which implies that the uptrend might be exhausting and a correction is possibly impending.
If you notice, similar kind of divergence developed earlier as well (marked in chart) but that resulted in little downside, or rather sideways move. So there might be nothing much to worry about as far as divergence is concerned if we go by stock history. Having said that, divergences should be paid attention to.
In terms of support and resistances, there isn’t much to work with as the stock has been moving pretty much one way in the longer timeframes. There is a support at 2750/2800 zone (marked in green in the chart above) but that’s quite far from current levels. Having said that, if there is a deeper correction in the future then this support might come into play.
Finally, let’s take a look at Elliott Wave counts medium term for the stock. I have taken the counts from the bottom made in June 2022 as that was the most significant correction in last couple of years.
We seem to be in 5th wave of some degree but wave 5 is not yet over. Hence the projections shows in the chart above as based on this week’s close and will change as the 5th wave evolve further. Having said that, 3rd is smaller than 1st wave hence I am expecting 5th to be smaller than 3rd (since 3rd wave cannot be smallest as per EW rules). Given this, 5th wave should be about to complete as we are nearly there in terms of 3rd and 5th wave equality.
Once wave 5 ends, we might expect a correction. And if the correction does occur, how deep it would be? Assuming the 5th wave will be over soon given the reason above and taking this week’s close as 5th ending, we can expect at least 38.2% correction which gives us 3000/3050. But given that fact that we do have a support around 2750/2800 zone and 50% correction gives us around 2800 so that would be a better confluence point.
EW comes with too many ifs and buts and all those apply here as well. As an example, one might say what if 5 waves get extended to 9 waves? Or what if the current impulse move is 5th wave of a larger impulse then it would be a much deeper correction. All that is possible but we need to have a bias for trading/investing and given the current setup and macros, I think this is a reasonable way to proceed.
So I guess that’s about Titan.
Sorry if you’re disappointed and were expecting some buy/sell call at X price level. You can stop reading further since you would be disappointed in all other stocks as well 🙂
Apollo Hospitals
Apollo Hospitals has hit a resistance and trading in the resistance zone as shown below. Overall setup looks moderately bullish though. The stock has been respecting the trendline (in red) since Covid lows and has bounced from it at least 4 times. This upward slanting trendline and the ATH resistance from November 2021 levels make it look like an ascending triangle.
Multiple of 100s and 1000s are always good support and resistance levels. In this case, 6000 is the key. If the price breaks and holds above 6k then uptrend should resume. But if it fails to cross the resistance zone shown above then it might head back to the trendline for another retest (or possibly break it).
In terms of Elliott Wave, I can count 5 waves up from Covid lows in the stock as shown below in monthly timeframe. Impulse has seen correction as well to around 50% levels and now we seem to be in next impulse up which could be 3 or C or larger degree. If we go by wave equality (wave 1 = wave 3), wave 3/C should give us a target of around 8250.
But for this to happen, stock first need to cross 6000 and should start trading above it comfortably.
To summarize, we have a support at the red trendline and need to watch it for any downside risk. On the upside, stock is trading in resistance zone and need to cross it before we can see any significant upside.
Phoenix Mills
Phoenix Mills also has features similar to Titan. Every dip to 200 WMA or RSI below 30 has been a good buying opportunity in the stock. Also, there isn’t much in terms of support and resistances since the stock has been moving up consistently without getting stuck in a range for long.
The move in last 10 months or so has been very sharp. From the low made in March 2023, the stock has moved up nearly 125% (in just 10 months) which is astounding. Due to this move, the stock looks very much stretched and trading far from key averages, i.e. some cooling off is imminent. The current week ended with a doji and significant volume activity which suggests that the up-move might be halted soon enough, even if it’s for a brief period.
Found it difficult to count waves in lower timeframes hence used quarterly (3M) timeframe where I can count 5 waves up from Covid lows. We are still in 5th wave but it might be near to ending. Once 5th is over, there would be likely a correction. Given the size of up-move, correction also may be significant.
If we go by the minimum (38.2%), we could go back to 1800/1850 levels assuming 5th wave does not breach the current high/ATH. Many a times, corrections retrace to previous wave 4, which is around 1250 and slightly more than 61.8%.
MakeMyTrip
Note that MakeMyTrip is not listed on Indian stock exchanges. It’s listed on NASDAQ in US.
Nothing much to say about the stock as it has been trading within a range of 10 to 40 USD since inception (12+ years). However, as you can see in the chart above, stock has finally broken out of the range with decent volumes and the price seem to be sustaining above the range. If we go by the range/box height, we can expect a move towards 66 USD which is nearly 40% upside from current levels.
You can also see that this is the first time, monthly RSI has ventured into overbought zone. For the above mentioned view to play out, ideal condition would be that the RSI stays overbought or thereabout.
Stock has been moving in corrective rage formations for long time but if you look closely, you can see that the most recent rise from bottom of the range is impulsive (5 waves) followed by correction (wave 2). And now, we seem to be in wave 3 since the wave 1 high is taken out by good margin. If I extrapolate the waves, I would get a target above 66 USD which is in line with the box breakout view.
Zomato
Zomato is a relatively new entrant in stock market and made it debut nearly 2.5 years back. Hence it does not have a lot of historical data and I’ll stick with weekly chart only.
Zomato has seen some very bad days as you can see from the chart above. It went down nearly 65% from the listing price within an year of listing. However, it seem to be making nice recovery as is visible from the rounding bottom pattern seen in the chart. And now after 2.5 years, finally stock is trading slightly above the listing price. Investors who bought it at IPO and held on to it must be breathing easy now 🙂
150/155 is the resistance zone and the stock is trading at 115.90 at the time of writing this. There isn’t much to do (from long term perspective) other than waiting till it hit the resistance and then see how it behaves. If it manages to break out above the resistance zone then it could give a significant move on the upside. But if it fails to breakout then it might continue trading in 125 to 155 range.
From near term perspective, it seem likely that the stock will continue moving towards 150/155 zone given the momentum visible in the stock though there are negative divergences visible in RSI.
Not including EW view as counts aren’t clear and much will depend on what happens when the stock reaches the resistance zone.
Devyani International
Devyani also made its debut on stock market around same time Zomato did, hence there isn’t a lot of historical data for this stock as well.
Similar to MakeMyTrip, Devyani too has been a range play since inception. Only difference is that Devyani is moving in a upward slanting range (blue trendline channel) instead of a horizontal one seen in MakeMyTrip.
Looking at the chart above, difficult to say whether it’ll move up or go down next. But if I have to make a bet, I would bet on downside outcome. Why? Firstly because stock is moving in a channel and seem to be heading down for lower trendline after reversing from the upper trendline. Second reason is due to Elliott Wave counts.
From the upper trendline, I can count a 5 wave impulse down as shown in chart above, followed by ABC retracement. This impulse down could be either wave 1 (of larger impulse down) or A (of ABC correction down). Given the setup, it’s likely ABC since range moves are typically corrective moves and we are still in a range. Irrespective of it’s ABC or 12345, the next outcome would likely be same. From here, the stock should keep moving down as shown in the chart above (red lines).
This view gets invalidated if the stock fails to break the low marked as 1/A. For longer term, we need to see what happens once this move has played out or gets invalidated. Till then, it’s a wait and watch game for investors. But for traders, there might be something for them on the short side.
Sapphire Foods
Sapphire is also a new entrant, in fact the latest of these all and was listed almost 2 years back. This too has little historical data.
The stock hasn’t made any significant move in either direction since inception but has stuck in a contracting range. This is where it gets interesting since the contraction is occurring in form of an ascending triangle which typically have bullish outcome. Apart from that, there isn’t much to write.
One of the things can happen now – either the stock would breakout above the green resistance, or it would breakdown from the red support line. Another, and the most useless, alternative would be that stock keep moving sideways along the green line in a range without giving a meaningful breakout or breakdown. Till any of those things happen, let’s wait and watch.
Not including EW counts as there isn’t much data and everything looks corrective as of now.
Eicher Motors
First, let’s get a high level feel of what’s going in Eicher Motors. Below is the monthly chart of the stock.
Eicher has been an outperformer among large caps from Covid lows and have given a whopping 230% returns since then. However, clear divergence is visible in price and RSI. Last time it happened, we saw a healthy correction as visible in the chart above. So far, the stock is respecting the trendline drawn from Covid lows and have bounced from it thrice.
This looks like a rising wedge or ending diagonal in terms of EW. Ending diagonal (ED) typically forms at the end of prevailing move (up-move in this case) in form of ABCDE. You can see that there was a breakout attempt last month but the volumes were missing and even the high of breakout candle is untouched so far. The fake-out candle in this case (at E) is actually a phenomenon known as throwover, which gives more weightage to ending diagonal or rising wedge formation.
If the above assessment is correct, stock has possibly made the top for the time being and should head lower from here. In this case, we can expect a very healthy correction (40-50%) from here.
However, if the stock breaks above the high (4200) made in last month without first breaking below 3748 then it would result in bullish outcome as the correct move would become impulsive. If this happens then the bearish view gets invalidated. But considering the divergences and current EW setup, I am leaning towards a bearish outcome.
Conclusion
In the near term, looking at the setups mentioned above, I think Apollo Hospital looks most bullish among all. Many of them are impending some sort of correction either due to technical reasons or simply because they look too stretched.
I am sure fundamentally all these stocks might be very good options if you’re looking at a time horizon of 10-15 years or more. However if your horizon is not that long then you might find this post useful.
It was fun writing this post looking at all these stocks from different technical perspectives and in the process, I too learnt a few things. On that note, I’ll wrap up this post.
Disclaimer: Intent of this post is to educate on technical analysis. Do your own due diligence for buy/sell decisions.
