I am new to Technical Analysis and this post is not a BUY/SELL recommendation.
I recently wrote on how the announcement of the Hosur airport might be an inflection point for TAAL (NSE: TANEJAERO) in way of monetizing its fixed assets.
Taneja is a very speculative scrip because there is not much information from fundamentals (low EPS, slow moving industry), so in this post I delve into some technical charts to see if Price and Volume behavior could give me more information on how the market is reacting to the news.
Here’s a copypasta from Investopedia on how to use the MACD.
The concept behind the MACD is fairly straightforward. Essentially, it calculates the difference between an instrument’s 26-day and 12-day exponential moving averages (EMA). Of the two moving averages that make up the MACD, the 12-day EMA is obviously the faster one, while the 26-day is slower.
Look how the 12-day EMA rises above 26-day EMA after a long subdued period on March 30, 2017. What happened on this day?
March 30 was the day when the Indian Central Government announced routes assigned to 5 regional airlines under the low-cost UDAAN scheme. One of them is TruJet that plans to use the Hosur Airstrip for regional flights to Chennai. For more details read the analysis of this announcement’s significance.
Let’s zoom in a bit.
You can see how the news was priced in after 31st March and the short term trend became Bullish as the blue line (short term Exponential Moving Average) increasingly diverged from the long term Red line.
Stocks react to news all the time. Why is this significant to a fundamental analyst like me, you may ask?
The above is a 5 year chart of weekly volumes in Taneja Aerospace. You will see the highest 5 year weekly volume was during the week of April 10, 2017 after a brief lull period.
It may be safe to assume this unprecedented surge in volumes in response to the news that broke on March 30, 3017 which has significant ramifications for TAAL which operates the Hosur airstrip. Let’s break this week down a bit more to examine what’s been happening under the hood.
You can see above that the surge in price was supported by the largest weekly volume in 5 years, which was followed by a sell-off – which was probably triggered by HNIs “stuck” in Taneja for a long time and who used this rise in price as an opportunity to offload their “stuck” shares.
Remember the last time Taneja went as high as 68 rupees was 1-year ago in January 2016. Since this is a non-profitable company and a speculative grade stock, its price responds mostly to “news” or “noise” and a lot of folks were stuck at those higher levels in early 2016. So the price range of 65-68 serves as a RESISTANCE zone for Taneja Aerospace’s stock price.
This is indicated by the huge volumes and red candlesticks (selling pressure) whenever the stock hits this resistance price range, even if it is preceded by white candles in prior sessions. See the price action for earlier last week (24 July) for the most recent illustration. High volume buying, following by high volume selling when the stock price hits the resistance zone.
So where does it go from here? There were 3 significant candlestick patterns in the recent weekly chart labelled 1, 2, 3 in the image below.
- White candle with huge volumes. Like the week of April 11 and June 15 – all surges in price have been accompanied by huge volumes which are usually twice or more than the selling volumes.
- Long lower shadow – after selling in the resistance zone, a bullish indicator shows itself on 25th July. Volumes are dropping significantly.
- Doji – which shows the fight between bulls and bears is coming to an end. The opening and closing price are nearly the same and the selling pressure has been absorbed.
The stock has been range bound for a long time. In the short term it seems the price is being kept down artificially by traders and short positions. These traders sit it out on days of huge volume as seen by the clean white bullish candlesticks. Weak hands and “stuck” HNIs seem to be almost out of this scrip and we may see significant moves in the future once accumulation/distribution is complete.
This post is not BUY/SELL/HOLD advice but a statement of my personal analysis and opinion. I am not registered with SEBI under SEBI (Research Analysts) Regulations, 2014. As per the clarifications provided by SEBI: “Any person who makes recommendation or offers an opinion concerning securities or public offers only through public media is not required to obtain registration as research analyst under RA Regulations”. No BUY/SELL/HOLD advice is offered on this blog, in any form whatsoever. Views expressed are my own and not of my employer. Stock Markets are very risky and can cause a permanent loss of capital. You should seek professional advice.