Chart of the day! - 14th December 2022

CHART OF THE DAY

• Welcome to the 8th edition of COTD (Chart of the day series). 

• A little disclaimer before I start, this is not a buy/sell recommendation. My purpose on starting this series was to reveal my understanding of charts and what things make them bullish or bearish for me. As everything is personal to me, I am a human and I make mistakes too. I may be wrong anywhere so please don't take these as tips. All this is done just to educate you so look at it that way only please.

Below is today's chart of the day!

Shankara Building weekly chart

What's making me feel bullish about this?

• The Past Uptrend :- Just have a look at the chart from June 2020 till the first quarter of 2022. Amazing uptrend comprising of higher highs and higher lows (Price made a low of 238 and then went on the make a high of 838, almost four times!) with really good volumes (see the huge green buildings below candles!). This clearly means that the buying was really really strong which drove the prices like a freaking rocket.

•  Price action during the uptrend :- If you would carefully observe how the price behaved while moving up in that amazing uptrend, you will find a great thing. Just observe. The price first went up making big green candles quickly with high volumes making a higher high and the it came down making small red candles slowly with lesser volumes. I call these institutional footprints because that's how they buy. Due to their massive orders, they can't buy in one go so they buy at once which pumps up the prices & then allow it to come down again slowly. Then they again buy which pumps the price & again allow it to come down slowly. That's how they build their positions according to my theory. 

• The recent consolidation :- After the final pumping of the prices, what did you observe? Is there any thing different? Yes! You got it right! This time instead of declining in one go, it is making a very narrow range, a very tight consolidation. What does that mean? It means that from, the buying is even more aggressive cause they are ready to buy even before the price hits the previous low or the trendline. This is a bullish signal which indicates that the buying hasn't stopped yet and the stock might continue its uptrend going higher and higher.

• Volumes in the recent consolidation :- If you would carefully notice the volumes during the recent consolidation and compare it with the volumes in the uptrend, you would find that they have dried a lot. The volumes are dipping lower and lower. What does this indicate? This indicates that the supply of the stock is slowly starting to come down and the buyers which have bought the stock are holding on to their positions instead of selling. This is again a nice bullish signal. 

• Symmetrical triangle :- The thing which puts icing on the cake is that the recent tight consolidation in the price currently is not any random dullness. Its a nice symmetrical triangle! It means that both buyers are selling are showing their dominance and trying to win the battle! Whichever side wins, rockets are fired in that direction.

• Volumes in the symmetrical triangle :- Notice the chart closely and you would see that when the prices in the symmetrical triangle went up, the green buildings on the bottom (volumes) also started rising. And when price in the symmetrical triangle went down, the red buildings on the bottom were smaller when compared to the green ones. The reason why this is bullish has been already explained above in the blog. 

 But for now, its time to play the waiting game. Where we, as traders wait for the right opportunity which gives us the validation & then we pounce on in hope of making some money. In this chart, we would wait for a breakout in this symmetrical triangle pattern & then enter only after the stock justifies our risk management setup. No breaking of rules, promise to yourself!

So, above are the reasons why I am bullish on the Shankara building weekly time frame chart. Do you have any other points that went unnoticed by me? Feel free to share them in the comments below!

THANKS FOR READING!

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