Escorts October Series

2018年9月28日

Technical Analysis



If we see the monthly charts of Escorts we can see it cracked after killing the uptrend and right now made a huge red candle. The question arises on whether it will continue to fall or bounce from here.




If we apply Fibonacci we can see an assumptive support at 50% retracement which looks fair as we can see the price action support is there too.




So, psychologically speaking if someone has Escorts shares and holding his current stop loss will be triggered at 548. 

The resistance is at 880 which means the risk-reward for the shorters will be too bad if someone shorts at this current situation as the current market price is 611.

But there is no question of buying as the selling pressure is continued as per monthly timeframe. Let's take a peek at the lower time frame for buying point.

There are two approaches right now to buy setup based on two different choices of time frame.

Day Frame - 



It is in the downtrend as per our bounce theory. The break of downtrend will cause significant upside momentum considering the strength of fall.

We can consider that lower swing high as our resistance i.e. 679 where psychologically if someone has short in current series will book his short.

Weekly Frame - 



We can apply the basic weekend strategy to define the downtrend here. It is not breaking the previous candle low. So, the high of the last candle i.e. 704.9 can be considered the conservative place for buying the stock 

Summarizing: 

When we should long?

Break of downtrend - If someone wants to long, he can long when 679 breaks (aggressively) or long at 704.9 (conservative view). These levels are subject to change as the weekly and daily timeframes continue to form.
Support and Resistance - When it approaches 548. We can long it based on support and resistance strategy, in that case, our risk-reward will be amazing.

When we should short?

As it is in the downtrend, we need to wait for another lower swing high to short. There is no question of shorting on lower swing lows.

Intraday view

Although we can also consider 600 as a tiny support as it being a whole number adds up to psychology level. So intraday we can short or long at near 600 betting to scalp the consolidation that happens there with tiny stop losses.

OI Analysis

unofficed.com/diary/wp-content/uploads/2018/09/fd0pBfn.png

The lower limit is 600 which is already said is psychological support. The upper range is at 760 which means people are not short on call options aggressively but these are far OTM options which give free leg room for the stock to go up if it bounces.

unofficed.com/diary/wp-content/uploads/2018/09/dYdBZcF.png

Due to the continuation of downtrend today alone 3x call options are shorted!

Turtle Trade Idea: 

Short 700 CE at 8.8
Short 540 PE at 9.3

In case the breakeven breaks, short/long Escorts depending on the side of the breakeven break.

Fundamental Keys

• The rise of crude oil is bad for tractor sales but there is no reason a customer will stop buying tractor as it falls under the necessity of operating a business.
  
• 1st of the month auto sales data is coming. The stock will move erratically.
  
• Next month the corporate results are coming. Even if the results come OKish, the stock will shoot upside because of the recent fall.
  
• Current scams on NBFC sector is affecting it synthetically but that is not going to harm the company fundamentals. So that will be at the maximum short-term pain.
  
• This results in an intrinsic value of ₹667.33 as per the Discounted Cash Flow model.
  
• Launched Traxi this month, a service platform to aggregate farm equipment (including tractors) demand, Escorts Ltd is hoping to transform itself into the next Uber/Ola of the agriculture segment. This is good for business.
  
• Analyst views: 11 buys, 1 sell, 2 holds. The sell call is based on technicals only which is correct as the stock is in the downtrend.
  

Refer:
unofficed.com/diary/2018/09/28/escorts-october-series/
business-standard.com/article/companies/how-escorts-ltd-is-transforming-from-a-pure-play-product-firm-with-traxi-118092601357_1.html
economictimes.indiatimes.com/wealth/invest/stock-pick-of-the-week-promise-of-long-term-growth-makes-escorts-a-top-buy/articleshow/65819514.cms