TCS - A GOOD MOMENTUM PICK

May 13, 2020 , , , , ,



TCS looks good on daily Time-Frame and a buy can be initiated. I have analyzed it on daily time frame considering few points.

KEY OBSERVATIONS- 

       1. Fibonacci Retracements -

  • Fibonacci retracement levels are horizontal lines that indicate where support and resistance are likely to occur. They are based on Fibonacci numbers. 
  • Each level is associated with a percentage. The percentage is how much of a prior move the price has retraced. The Fibonacci retracement levels are 23.6%, 38.2%, 50%, 61.8%, and 78.6%.
  • TCS managed to retrace around 61.8% i.e 1980 from bottom of 1557 which it made around on 19th March. A move above 61.8% suggests a Trend Reversal for any stock.
  • TCS failed to sustain above 61.8% i.e 1980 and it fell back to 50% i.e 1890. For about a month 50% i.e 1890 was crucial level for TCS to break, which it managed to sustain this time. (shown by arrows in graph)
Click on Chart to Expand


 2. Channel Analysis -

  • A price channel is a continuation pattern that slopes up or down and is bound by an upper and lower trend line. 
  • The upper trend line marks resistance and the lower trend line marks support.
  • Price channels with negative slopes (down) are considered bearish and those with positive slopes (up) bullish.
  • For explanatory purposes, a “bullish price channel” will refer to a channel with positive slope and a “bearish price channel” will refer to a channel with negative slope.
  • TCS is currently in a good bullish channel for last 1 month and currently respecting the trend lines. Based on this, TCS will continue to move upward and good returns can be generated.


      3.  Moving Averages -

  • A moving average (MA) is a widely used technical indicator that smooths out price trends by filtering out the “noise” from random short-term price fluctuations.
  • The most common applications of moving averages are to identify trend direction and to determine support and resistance levels.
  • For short term Trading Purpose we can considered 9 day and 21 day Moving Averages has seen a good positive cross over of 9 and 21 day Moving average. 
  • TCS has also managed to sustain above its 9 day moving average for few days, which shows its in strong UP- trend.


      4. RSI -

  • Relative Strength Index (RSI) is momentum oscillator that measures Speed and change of Price movements.
  • RSI oscillates between 0 and 100. Traditionally RSI is considered overbought when its above 70 and oversold when below 30.
  • RSI of TCS has hovering in mid 50 to 60 for last few days. This also suggests that there is strength in Up-move of TCS.


      5. Directional Movement Index -

  • The DMI is a technical indicator that is typically shown below or above the price chart and is calculated by comparing the current price with the previous price range. DMI then displays the result as an upward directional index (+DI) and a downward directional index(-DI). 
  • The DMI also calculates the strength of the upward or downward movement and displays the result as a trend strength line called Average Directional Index or ADX.
  • +DI and -DI show up as two separate lines, colored green and red, respectively. When the red line is above the green line, it means the price is dropping. 
  • When the green line is above the red line, it means the price is rising. If the -DI and +DI are crisscrossing back and forth, there likely isn't a price trend going on, and the price is moving sideways. 
  • An ADX reading above 25 signals a strong trend is in place.
  • Based on this explanation, DMI of TCS is currently at 25 which is strong, suggesting strength in price movement.


SUMMARY-
Considering all the above points, we can initiate a trading Buy in TCS at 1949 with Stop Loss of 1855 ( which is below 50% retracement). Trading Target can be set at 2050-2075-2100.


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