Most of the people believe that technical analysis is only helpful for short term trading like 2-6 months etc. But long term trends take months to develop therefore we should analyze stock over a longer horizon.
Charts and patterns evolve over the long term like 1 to 4 years, and if we relate them with developments in the company, we can get the big picture of the company.
How to Identify Long Term Trends?
- Analyze stocks on a different time frame like Daily, Weekly, Monthly.
- Give more weightage to higher time frames.
- Look for a breakout on weekly and monthly charts.
- Watch the financials of the company carefully (sales and operating profits) after taking a position in the stock. Most of the time the stock reacts first and the news follows later.
- Analyze peer companies if available.
Lets take some examples of some of the stocks.
Reliance Industries
Reliance Industries went through a long term range bound movement for 8 years. In beginning of 2017 it broke that consolidation with good volumes and rest is history.
If we check the financial of the company there was nothing great as petrochemical business was already matured but the company had made huge investments in RJIO. When stock gave a breakout, it was more of a speculative move but later financial also supported and the stock became multibagger thereafter.
Reliance Industries revenue started picking up in 2017 and till date rising with phenomenal growth.
Havells India
Havells India went through a long gestation period of 30 months before becoming investors’ favorite stock.
Lets looks at financials of Havells India.
In beginning of 2017 we can see a good improvement in sales and operating profit. This shows improve in business of the company.
Titan
Titan (Rakesh Jhunjhunwala top pick) too went through a long 3-year consolidation before on-setting a new journey of becoming multibagger.
Titan financial too reflect the price movement of the stock. From 2013 to 2016, there was stagnancy in the business. After 2017, we have seen phenomenal growth in the revenues of the business as operating profit almost doubled in 3 year.
AstraZeneca
AstraZeneca consolidated for 6 years before starting a journey towards multibagger.
AstraZeneca’s finances also shows a great improvement in business. The company completely turned the table around as changed to profit-making to loss-making company.
Vaibhav Global
Vaibhav Global is another company that has shown good improvement in its business lately.
The stock has given a strong breakout near Jun 2019 after consolidating for 9 months.
Vaibhav Global financial also shows same picture of the stock. The company’s operating profit increased 30% ( compared to previous Dec 18) during Dec 19 quarter.
Conclusion
- Keep a watch on stocks which are trading near 52 weeks high.
- Keep a constant eye on developments by the company. It could be either in the form of large CAPEX or new technology introduced in the business.
- Charts should be analyzed on larger time frames like weeks and months.
| Learn Technical Analysis | |
| How To Identify Demand & Supply Zones? | |
| How to draw Inverse HnS? | |
| How to trade IPO stock? | |
| Where to track markets daily? | |
| How to Manage Risk in Trading (Intraday/Positional)? |
