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Down More Than 40 Percent From The Highs, Is  The Trend Still Intact In Bharat Forge??

Down more than 40 percent from the highs, is the trend still intact in Bharat Forge??

Buy at CMP 467 stop 429.20 Target:

Year-on-Year Performance:

  • The company’s operating income during the quarter grew 33.5% on a year-on-year (YoY) basis. The expenses were up by 40.1% YoY during the same period.
  • The company’s operating profit increased by 17.6% YoY during the quarter. Consequently, operating profit margins witnessed a decline and stood at 25.9% in 2QFY19 as against 29.4% in 2QFY18.
  • Depreciation charges increased by 17.1% and finance costs increased by 48.0% YoY, respectively.
  • Other income declined by 7.7% YoY during the quarter.
  • Net profit for the quarter increased by 11.7% YoY. Net profit margins during the quarter declined from 15.7% in 2QFY18 to 13.3% in 2QFY19.

Quarter-on-Quarter Performance:

  • The company’s operating income during the quarter grew 13.5% on a quarter-on-quarter (QoQ) basis. The expenses were up by 18.4% QoQ during the same period.
  • The company’s operating profit declined by 1.3% QoQ during the quarter. Consequently, operating profit margins witnessed a decline and stood at 25.9% in 2QFY19 as against 29.0% in 1QFY18.
  • Net profit for the quarter declined by 3.0% QoQ, while net profit margins declined from 15.5% in 1QFY18 to 13.3% in 2QFY19.

Technical View

The stock has corrected some 45 percent from the highs of 798. The Fibonacci analysis is indicating a trend reversal from the current levels. First the Fibonacci grid is being made from the higher low of 100 odd levels. That the grid is being made from the first higher low is an indication that the stock is in a strong uptrend. The current fall has halted at the Fibonacci confluence zone of 442-455.According to Fibonacci analysis the trend is intact as long as the 61.8% of the major swing is intact. The fall has halted at the 50% from the higher swing and that means the trend is intact despite the steep fall. On theses important support and resistance zones we try to find some clues of a reversal. On the Fibonacci confluence zone of 442-455 the current month candle is a Doji. Doji is a single stick reversal pattern and since it is formed on an important support the probability of the reversal is very high. At the support zone RSI has halted at the bull zone of 40. Therefore the momentum indicator is also at an important reversal zone. The time analysis is also indicting an in flexion point for the counter. Since the trend is still intact and the stock is indicating reversal from the current support the probability of the stock reversing from the current levels is very high. Hence once can buy the stock at CMP of 467 with stop below the confluence zone at  429.20 and with the first target at 523 which is the Fibonacci confluence zone and the second target of 586 which is the pivot point on the charts. The second target of 25 percent move is a high probability from the current levels. This zone is also supported by the time count which further re-enforces the case for a sharp reversal from here.

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