10 Oct 2021 | Trendline Investor | Newsletter 19

Can Nifty head to 18300 levels?

Disclaimer: I am not a SEBI registered advisor and this newsletter is for educational purposes only

Hello <<First Name>>,

Welcome back to the 19th edition of the Weekly Trendline Investor Newsletter. In this edition you will find the Market outlook, Top 4 stock picks and a short write up on how to identify and trade a Cup and Handle pattern formation. Hope you enjoy!

Nifty forms an insider bar again this week!

  • Every dip in Nifty has been bought since the breakout on 3rd Aug’21 and the trend has been very strong on the upside.

  • This week Nifty has formed an inside bar again indicating price compression in weekly charts.

  • Price compressions are usually followed by price expansions and I presume that the price expansion might occur on the upside and that might take Nifty towards levels of 18300 levels in the coming weeks.

  • The broader markets also have been quite good this week with the smallcap and midcap index hitting new all-time highs.

  • The only way to ride this crazy bull run is to trail your stop loss and to not jump off the train preempting a crash. Don’t miss this crazy opportunity to make money by trying to play the guessing game.

  • As the saying goes, ‘The Trend is your Friend, until it bends”

Market Breadth:

  • The broader market is again showing strong signs and the market breadth number that I track using the CCI indicator has hit a 6-week high this week, indicating more stocks are joining the party again.

  • This strong uptick makes me turn very bullish again on this data point and we can see a strong market breadth in the coming weeks.

You can find all the daily YouTube live sessions (every Monday to Friday at 11PM IST) along with the review of my Trade with Trendline Investor’ portfolio (which is up 21% in just 3 months), on my YouTube channel. Do check it out.

Top 4 Stock picks for the week

Stock Performance:

For the 72 stocks recommended in the past editions, the below chart highlights the overall stock performance. A total of 24 trades have been closed.

  • Best performers 🏆:

    • Kitex Garments is up 50%

    • Stovekraft is up 34%

    • JK Lakshmi Cement is up 33%

    • VIP Industries is up 30%

    • McDowell is up 30%

    Worst Performer ⚠️:

    • Redington is down 16%

For past recommendations, stock performance and trailing stop loss updates, please refer to this sheet. You will also find some interesting FAQs that will guide you how to allocate your money to the stocks recommended.

1. ​​Fertilizers & Chemicals Travancore Ltd 🧪

  • Fertilizers & Chemicals Travancore is engaged in Business of Complex Fertilisers and Ammonium sulphate.

  • The company has been posting excellent numbers in the last few quarters with the operating margins jumping from 10% in 2020 to 17% in 2021.

  • The Sales in FY’21 increased by 17.6% year-on-year, while the operating profits increased by almost 100% in the same period. Borrowings have also reduced significantly.

  • Technically, the stock broke out from 20-year rectangle pattern and has been trending in a parallel channel ever since.

  • The price is trading towards the lower end of the channel and is setting up nicely to head higher towards targets of 175 and higher in the coming years.

2. Indo Count Industries Ltd 🛏️

  • This textile company is involved in manufacturing bedding, quilts pillows and sleeping bags along with blended cotton.

  • The company reported an increase of 20% in Sales and more than 2x in operating profits in 2021 mainly driven by a significant increase in the operational performance. The operating margins increased significantly from 9% to 16% in 2021.

  • Technically, the stock has been trending strong since the breakout in Oct’20 and also retested the trendline support during the recent correction in Aug’21.

  • The stock looks good again after a 9 week consolidation and is looking good to head towards levels of 450 and higher in the coming months.

3. PG Electroplast Ltd 🖥️

  • PG Electroplast is an Electronic Manufacturing Services (EMS) provider for Original Equipment Manufacturers (OEMs) of consumer electronic products in India.

  • The company posted its best ever quarterly numbers in Mar’21 quarter. The sales jumped by 80% compared to Dec’20 which also meant its profits doubled in the same period.

  • Technically, the stock is consolidating for the last 7 months around a 10-year horizontal resistance and is looking good to move higher from here.

  • The strong volumes this week and the price action can take the stock towards levels of 750 and higher in the coming years.

4. CCL Products (India) Ltd

  • The company is the world's largest private label coffee manufacturer with plants in India, Vietnam and Switzerland and produces 250+ blends of Instant coffee for leading global coffee manufacturers in 90+ countries.

  • The company fundamentals look very good overall and has grown its Sales and Profits at a CAGR of 13% and 22% in the last 10 years and posted its highest EPS this year at Rs.13.70.

  • Technically the stock gave a strong breakout with strong volumes and been consolidating since the last 2 months.

  • The stock is again showing some momentum and looks set to head higher towards 500+ in the next few months and 750+ levels in the long run.

Trend Following Series- Chart Patterns

In this week’s blogpost, I have written about the Cup and Handle pattern formation.

I have explained how you can identify this pattern formation and more importantly, how you can trade this pattern i.e. conditions required to confirm the pattern formation and how to identify the entry price and stop loss. I have also taken some examples to showcase the same.

I hope you enjoy reading it!

Until next week..

Your Trendline Investor!

For any queries, please contact me on twitter @dmdsplyinvestor using #Asktrendlineinvestor.

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