Should you Buy/Sell Tata Motors- The Complete Technical Analysis

Should you Buy/Sell Tata Motors- The Complete Technical Analysis

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Over the past few months I’ve been documenting my trades and learning a LOT about deeper concepts of Trading. So, based on the stuff I’ve learned over the last 2.5 years, I present to you a simple analysis of Tata Motors.

A Few Things to Know-

  1. This is NOT a buy/sell recommendation. Everything I mention is completely based on my analysis and personal views about the stock.
  2. Always do you own analysis while trading and I am, in no way responsible for your losses and I don’t provide any tips.
  3. This analysis is based on Swing trading. The chart we’ll be using is the 1 Day chart.
  4. The analysis is based on 2 weeks to 1 month time period. the stock might not show a movement in the right direction immediately.
  5. This analysis was done on 23/07/2020. i have no idea when you’re reading this article.

My analysis is based on 9 setups, I usually use 7 setups while analysing a stock. One setup can be misleading or my analysis can do wrong, but when I use 7-9 setups, if the majority setups tell me to buy, I’m bullish on the stock and vice versa.

My Setups-

  1. Price Action Trading & Fibonacci Retracement.
  2. Heikin Ashi and Stochastic RSI.
  3. 20 and 200 Day Exponential Moving Averages (EMA).
  4. Divergence.
  5. Volume Analysis & Divergence.
  6. Volume Analysis using Delivery Percentage.
  7. Nifty/ Sensex correlation.
  8. Sector Performance.
  9. Option Chain Analysis.

 

#1. Price Action Analysis.

In the above Chart I’ve mentioned the resistance zone, Fibonacci points and the trendline. 148 is the major Resistance of the stock. Breaking that level is going to be challenging for the stock. Also, I’ve drawn a double bottom pattern on the left side of the chart.

The neckline of the pattern, coincides with the 50% retracement level of the Fibonacci. Recently the stock is in a slight uptrend but the is a near resistance at 38.2% level. If the stock breaks the 38.2% level it will face a major resistance at 50% and if it breaks that too, it’ll retrace from 61.8% lvl.

My bias and a little backtesting says that the stock will either go to 117-120 level or maximum up to 130 level and retrace back.

#2. Heikin Ashi + Stochastic RSI.

The stock beautifully follows heikin ashi. You can see that the RSI is near 40, so it is neither in the overbought nor in the oversold zone.

#3. Volume Analysis.

This is very things get interesting. Even though the stock is rising, it is not a volume supported move. The volume is actually declining, you can clearly see a divergence. This is not a strong up move. The VMA, Volume Moving Average shows a declining volume.

I’ve drawn a divergence which clearly states that this is not a volume supported up move and it probably wont last long, with that being said, it doesn’t mean that the trend will reverse tomorrow.

#4. Divergence.

In the above picture you can see that there is not much divergence between the RSI and the chart. You can see a slight divergence in the lower end, but it is secondary.

Also, the MACD divergence isn’t significant either. A little divergence can be seen, but it may not be substantial. I haven’t plotted the upper band divergence perfectly, but it can be ignored.

#5. Moving Averages.

The stock can be seen in a downtrend in the long term (200 day EMA ) but in an uptrend in a 20 day EMA. The 200 day EMA is definitely stronger and the stock will probably rise to 118-120 level and the 200 Day EMA will act as a Resistance.

#6. Index Correlation,.

In the above chart, Tata Motors is compared to Sensex 30. There is little positive correlation between the two. Not a lot though.

When Sensex rose significantly, Tata Motors has risen slightly. So if sensex falls, there could be a fall in Tata Motors too. personally I don’t prefer stocks which are in positive correlation with the index.

If Sensex falls tomorrow, a fall can be expected in Tata Motors too.

#7. Delivery Percentage.

I have pulled out delivery data over the last 30 days. You can simply do it using the NSE website. I’ve calculated the average price and the average delivery percentage over the last 30 days.

In the yellow table, the avg data for the last 5 and 10 days respectively is mentioned. So how do you analysis it? What can I conclude?

The delivery percentage can be see increasing daily over the last 5 days and there is a slight increase in the price too. that would have been a serious buying signal, but then I looked at the volume. The volume has been decreasing while the price and delivery percentage have been increasing.

To make things more confusing the price and delivery % have been decreasing over the last couple of days while the volume is increasing. That gives mixed signals.

overall you cant conclude something concrete as the data is weird.

#8. Option Chain.

If I’m being honest, I can’t read and option chain very well (yet). I’m still learning it, but I decided to include it in our analysis as this is a very high probability trading system. I’m still learning. But I can use it to find vital Support and Resistance areas.

There’s a strong Resistance at 120 rupees with 6.5 million contracts on that strike price and 115 also has a resistance. As far as support goes, a support at 90 and 100 can be seen in the stock. I’ll analyse the option chain more deeply after I learn more.

Final Verdict.

Your question might be “What the hell are you trynna say? You’re saying that the stock will either go up, or go down.”

Here’s a simple excel sheet I made about the signals given by different setups and overall, the verdict is the up move is probably temp as it is not volume supported and the stock will face major resistance at 120 and 130.

So the best thing to do now is to wait and watch what happens. If the stock faces a resistance at 117-120 (which it probably will), it might consolidate for a while and take a small dive. A quick up move can be expected in the short run.

Overall, you can expect the stock to Go Down in the short Term.

This analysis is applicable for Swing Trading. The stock wont go all the way up to 120 and consolidate and come down tomorrow. It’ll take time. Give it 2-4 weeks, and let’s see if my analysis works out to be correct.

I’ve also analysed TCS, RIL, SBI and Ashok Leyland. You can read the verdict in the excel sheet.

-Vikrant C.

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