Why this post?
(1) Recently I was going through YouTube videos of @TraderDante; one thing he stresses is to spend more time on your trading journal than looking at charts. (if you don’t know about him check out his Twitter account or check out this post from The Trading Resource Hub)
(2) Putting my trade in public prompts me to look at it objectively. I don’t want to be clouded by the outcome. Writing this post I learned there are holes in my position sizing. More eyeballs the better feedback I can get.
“Just because you get away with it, doesn’t mean you have not taken risk”
Don’t know where I read this but this is my motto
Company Brief
TECHNOE - Techno Electric Ltd. is engaged in multiple businesses in the Power Sector - (1) EPC in the transmission sector (substation) (2) Smart Meter Installation (Distribution) (3) Flue Gas Desulphurization (Generation). Apart from that it is venturing into Data Center Business where the company is building its first data center.
The Setup - Converging Moving Averages
Techno Electric had in the past given a sharp up move when it broke into new highs after bouncing from the Moving Averages convergence. The Stock broke out on 9th November 2023 and gave a 50% move in 50 days.
(1) New ATH after sharp move of 50% in 50 days. The stock sold off from the top at a very high volume.
(2) The Stock took support near the EMA 21 region before trying to retake the ATH
(3) Another attempt at ATH. The move was not supported by volume and could not be sustained.
(4) The EMA 21 support was decisively broken. Took support at EMA 50. Between (3) and (4) there was another attempt at high volume to retake the ATH which didn’t materialize.
(5) The stock was rejected again at the ATH Zone.
(6) Took support at EMA 100.
However, now the short-term moving averages start behaving like resistance. The stock got rejected at EMA 50, broke the EMA 100 Support, and slid to EMA 200.
(7) The EMA 200 is the make-or-break level—the final Straw. Will it Hold?
The stock bounced from EMA 200 at a decent volume (14th March 2024).
The stock was a clear-cut case study of Moving average acting as a support and once decisively broken acting as a resistance
The Reversal
15th March 2024: EMA 9 acted as the resistance level. Rally attempt unsuccessful. Doji Cande.
(8) EMA 200 acted as a crucial support. The stock did undercut the EMA 200 level but the level was fairly respected. A solid candle to EMA 9 on average volume.
(9) 22 March 2024: Strong move past the near-term resistances of EMA 9, 13, 21, and 100. A solid candle. Still below EMA 50. Will it act as resistance?
Launchpad Setup
(10) 26-28 March 2024: The stock not only moved past EMA 50. It gave a pullback to EMA 50 on avg volume and bounced on above avg volume.
Look at the green circle - The moving averages have converged except for EMA 50 which is above EMA 9,13 & 21 (which is a negative). But on the positive side, the price volume characteristics were good i.e. rising on higher volume and pullback on lower volumes, crossed the pivot point, and made a new 20 trading day high (Doncian Channel High set at 20).
2.7% position initiated on 28th March with SL at EMA 50. Entry at 771 SL at 725 i.e. 6% Risk. Total Risk = 0.16% of the portfolio
The next trading day, the stock showed strong strength with the confirmed convergence of moving averages.
Given the stock is from a strong group. - power and data center scaled the position further. 2.4% at 805.
Basically this transaction added to the risk. Outcome wise this was a great decision but process wise not. Learning:
1) The initial position risk was too low.
2) The stock was approaching the previous ATH resistance so risk/reward at the time of adding risk was not good.
Anyhow total position 5.1%. Total Risk becomes 0.4% of the portfolio.
Resistance Again
(11) Met with resistance again at the ATH. However trailing at EMA 50 the SL had inched up to 750.
Breakout + Gap + High Volume
After the ATH attempt TECHNOE took support at EMA 13. A sharp bounce from EMA 13 on 16th April.
(12) Gap up on 18th April. The Gap was on strong volume which by the EOD turned out to be highest volume over 1 year (HV1). Added 5.4% at 903.
So multiple edges playing over here:
1) Breakout to new ATH
2) Supported by high demand (Volume Upsurge)- HV1 edge
3) GAP - a strong support Zone
To Sum up the position amounted to 10.5% with an avg Cost 842.5.
SL moved to 800 i.e. EMA 21. So .5% risk on the trade which is my 1R.
(In the hindsight if SL was kept even at the gap low a larger position could have been built with the same risk)
What Next from here?
The company secured a big order - disclosed on exchanges on 29th April.
(13) The stock made a new ATH on high volume which is higher than HV1 but the candle has an upper wick. So yet another ATH rejection (after 1,3,5,11 points on the chart).
Now lets move on a higher time frame i.e. weekly:
It has given 20%+ move in less than 4 weeks. Plus, it has a history of making bigger moves.
What Next from Here??
Given the fundamental study of this stock. I will give room. I could have had a better position size but will not add risk now.
If it consolidates in a tight range above EMA 21, it could be potential entry for a bigger size swing trade.
My strategy will be to trail half position at EMA 9 daily and the other half at EMA 50.
That's the plan for now. let's see how the chart evolves
Update 2nd June 2024
The 29th April move proved to be an intermediate top for the stock. It consolidated above EMA 9 and made a new high on 14th May.
(14) Could you look at the upper and lower wicks in the rectangle area? The previous resistance is now acting as support.
(15) The 27th May candle was the volatility event. The stock fell 10% undercutting EMA 21.
What happened on that day? The short-term SL of EMA 9 (for partial position) was hit in a jiffy before I could react.
The following factors helped me stay put in the position:
(i) The volatility was before the results. Given the profit cushion, I could keep it through the results
(ii) Fundamental research on the sector. This company benefits from the trends in the Power Transmission arena. This is not a short-term cycle but a long-term cycle.
(iii) Technically there was respite on the shorter time frame (15 min charts) —Large lower wick on large volume indicating absorption of selling pressure.
(iv) The previous support area was not breached.
(16) Respected the support zone and reversed. 30th May after tussle between bulls and bears, the stock made a new high.
Added a tiny position of 1.2%. Fundamentally I wanted to add a decent allocation may be 5%+ but due to impending election result, not venturing. Also the breakouts have been failing a lot.
(17) Blast off on 31st May. TECHNOE touched the circuit limit of 20%.
What next from here??
One of the strongest stocks in the market. Extended now so difficult to top up and follow the exit on Moving averages. Though the exit polls have come volatility is still expected in the market. My last position at 1215 is the uncle point now.
Lets see how the chart evolves.
Update 9th July 2024
No change in Position. Consolidating near ATH.
Update 25th July 2024
Added 3.3% Allocation at 1665
Technically in blue sky zone (SL for this tranche is previous day low which is just below EMA 21 daily)
Fundamental trigger is the increased allocation to transmission sector
What are your thoughts on TECHNOE ? (Leave a comment below)
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Disclaimer: I am not SEBI registered. The information provided here is for educational purposes only. This is not buy or sell advice. I will not be responsible for any of your profit/loss based on the above information. Consult your financial advisor before making any decisions.
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