3rd March 2015 D Day for Cement Giants
ACC - a Cement giant and a F&O enlisted company, having more than 22,000 crores market cap, and one of the top three cement brands - market share wise, in India. Other 2 companies are Ultratech Cements and Ambuja Cements.
As the charts shows, all the 3 giants were in bull phase in the famous bull run of 2013-14 of Indian stock market. We are going to discuss the case of ACC Cements today. ACC hits high of 1315 in October, 2007. But it was also a victim of 2008 debacle. The stock went down to hit the low of 365 in the month of October, 2008. Exactly in 12 months, the stock went down upto 72%. If some one would have short the same in this period, the profit would have been amazing. This is the power of stock market.
After October 2008, the stock started the northward journey and it took 3 years and 4 months, to acheive the previous high of 1315. In February 2012, ACC again hit the high of 1315 and not only that, it crosses the previous high and continue upward move. High of 1421.75 was recorded in the same month. Retracing back to 913.9 in September 2013, It again started upmove and recorded all time high of 1774.65 in March 2015. The Nifty reversal, was also started in the same month. Infact just one day after the upmove of ACC was haulted. It was 3rd March, 2015.
After achieving the high of 1774.65 in March, 2015, on 3rd March, the counter formed a Spinning Top candle on the top, just after a huge green candle. Green candle of 2nd March 2015 was of almost 5%. The rally of ACC was of 386% since it hit the low of 365 in October, 2008. It had proved investors paradise by giving almost 400% return in 7 years.
Now, what we are going to discuss today? Why I am saying this? Because, looking back to these last 12 months, the stock has recorded almost 33% retracement. Closing at 1190 on last trading day of the week - 26th Feb, 2016.
Not only ACC, the other 2 giants Ambuja Cements and Ultratech Cements also formed reversal candle on the same day. The pattern was not the same on all the 3 stock's charts, but result was almost similar.
1. All 3 stocks recorded a red candle on 3rd March, 2015.
2. All 3 Stocks recorded a strong bullish candle on 2nd March, 2015.
3. 2 of them-ACC and Ambuja Cements recorded there all time high on 2nd March, 2015. Ultratech Cement recorded alltime high on 4th March, one day after reversal candle appeared on the charts.
4. All 3 stock recorded reversal bearish candle on 4th March, 2015. it was the day when Nifty formed bearish engulfing pattern on the charts.
5. All 3 stocks recorded considerable downtrend on the charts. the retracements recorded in last 12 months are as under
ACC Cements - 33% Retracement (high 1774 to 1190 CMP)
Ambuja Cement - 34% (High 287 to CMP 189)
Ultratech Cement - 24% (High 3398 to 2578 Low in Jan 2016)
6. All 3 stocks are F&O stocks.
That's fine. What is the point of discussion. What is so important about the similarity of patterns in these stocks? Does it has any importance on trading decision? Off Course yes, if you can realise it.
Watching the monthly charts,
1. Ambuja Cements and ACC are on the support line drawn from picking the bottom of October 2008.
2. Both are about to form or already formed Head & Soulder on monthly chart.
3. Ultratech Cement has retraced less then both ACC and Ambuja.
This lead to conclusion that,
1. If the support line in ACC and Ambuja are broken on monthly charts then the bearish domination will be established and the stock will enter in the long term bear trend. So, the chance of short and earn in the market.
2. If the stocks reverted from here, and starts the upward movement, there is a chance of making long position. Monthly charts should be seen for decision making.
3. If the 2 stocks breaks the support line and continue to be on down aide, the 3rd stock - Ultratech Cement has plenty of room to come down as it has retraced less then other 2 cement stocks. Traders can opt to short this stock.
As this is the time when all have their eyes freezed on Central Budget tomorrow, the market will take the move according to the provisions of the budget. Nifty is showing reversal from the bottom, but does not have enough strength to break the resistance levels formed by itself on the charts. Infact, monthly charts of Nifty suggests a different story and will discuss on some other day, at present we are looking for a short term bull run if the resistance of 7130 and 7200 respectively are broken on daily charts, If it happens, the Nifty can go upto 7500. Which seems a bit difficult.
Let's watch few days, the movement of the market and our 2 stocks - ACC and Ambuja cements. Infact the closing of February candle on Monday, tomorrow, will throw the lite on the situation. The opening of March candle on Tuesday may clear the picture more precisely. By the end of this week, the picture may clear completely.
Lets watch and trade.
Happy Trading...Trend is Friend...
- Anand Singh Gaur
- Sunil Kothari