Tuesday, June 10, 2014

Trading BPCL: Applying Basic Technical Analysis!

In the current rally of Indian Markets, Oil and Gas is one of sectors which has performed well. 
Within this sector, stocks of Public sector entities has shown strong performance. Recently, stocks like ONGCBPCL, etc. has touched life time highs. Now, question arises how to trade after such exponential rise?
We have been applying basic technical analysis on BPCL to find out the support using EMA, resistance as well as which are the good entry points for upcoming trade.
Below write-up is taken from “The Financial Waves Short Term Update” which was published in today’s morning.
BPCL Daily chart:
Wave Analysis:
BPCL an oil and gas company touched life time high at 650 levels on 6th June. On the same dateONGC was up more than 10%, hitting all time high at 469 level. Such heavy weights participating more than 10% in single day gain is the reason why momentum on Nifty is not slowing even if the other stocks does not move up that much on comparative basis.
For stocks like BPCL, the best trading method is to use trend following system. We have described the concept in the current Nifty write-up and we can use the same method here as well. As long as the 10 days EMA is above the 20 days EMA the trend will remain positive. Only when the shorter term average crosses below longer term we will know the reversal is in place but unless that happens one should ride the trend as long as it lasts.
As shown on the daily chart, prices have been constantly forming higher highs and higher lows from the lows of 260 levels. Also the steepness of the rise has kept on increasing indicating that more and more interest is generated in the stock as it is going up.
Also an important thing to observe is that after making new highs this stock shows some pull back on downside which provides good entry levels. Going by this concept the recent high is made at 650 and any pull back towards previous peak at 590 can provide good levels to enter. The concept will work as long as we do not see lower highs and lower low formation. From level perspective 520 is going to be crucial support and our bias will be positive as long as this level is intact.
In short, the trend for BPCL remains firmly positive and short term pull back towards 590 to 595 can provide another trading opportunity. However, maintaining strict stoploss will be crucial for any trades since reversals can be fast as the rise has been exponential!
To get daily 3 stocks along with Nifty updates before market opens subscribe to Financial Waves STU. To subscribe visit http://www.wavesstrategy.com/index.php/store.html

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