Developing Technical & Fundamental outlook on HDFC, BUY or SELL?
מעודכן
After the news of HDFC’s duo merger, the Market cheered and the price shot up. Now it’s back to the breakout point after the huge rise.
Is it a good level to buy?
Let's get into the Technical outlook first, then, we will explore the fundamental view of the merged entity.
Technical Outlook:
Bullish signals
• Inverse Head & Shoulder pattern formation
• Breakout of neckline & Retest
Bearish Signals
• Price could not sustain breakout of Major Resistance @ 2506 & trading below Psychological level @ 2500.
• Indicators showing weakness.
The chart has formed an Inverse Head & shoulder pattern.
This pattern is considered a continuation pattern and a breakout above the neckline is a bullish signal.
The Gap up and volume spike was due to the HDFC duo merger news.
Price is back at the breakout level and retesting the neckline support.
One key thing to notice on the chart is the Major S&R line at 2506. The price could not sustain above this level and currently trading below the psychological level of 2500.
Overall Technical outlook – Neutral, Wait for buy/sell signal
For Intraday/ Swing Trade purpose:
Two important levels are - Horizontal Resistance at 2506 & the Neckline Support at 2435.
If the price breaks down below 2435:
Sell at the next red candle or at the retest of breakdown near 2435.
SL - above the Major Resistance 2506.
If the price breaks out above 2506:
Buy at the next green candle or at the retest of breakout near 2506.
SL - Below Neckline support 2435
Target/ Exit Level – Trailing SL
We'll get correct levels only when the breakout happens under suitable conditions. There are multiple possibilities. The price may go up, down, or sideways.
--------------------------------------
Fundamental Outlook:
The HDFC duo has a track record of good business practices and customer service.
The future looks promising for the merged entity.
Reason?
Home Loans are secured loans as the house is kept as collateral.
Banks love this segment as they have the benefit of cash deposits which are available at lower rates, and they can offer cheaper home loans than NBFCs.
But HDFC Bank could not aggressively participate. All they did was assign these home loans to HDFC for a small fee.
Why do you ask? Because they would be directly competing with HDFC if they did.
The merged entity will have the benefit of:
1) Cash deposits at significantly lower rates which will help offer cheaper loans
2) The customer base of HDFC bank
3) HDFC Bank will have the freedom to aggressively sell these loans.
Key Risks:
HDFC Bank has always played safe by keeping a lower concentration of loans in the higher-risk segments. It even survived the collapse of debt-ridden infrastructure companies in the 2000s.
It seems that this strategy is changing. This press release says:
hdfcbank.com/personal/about-us/news-room/press-release/2022/q2/hdfc-limited-and-hdfc-bank-limited-announce-a-transformational-merger
A lot of mergers don’t work as expected. There could be many reasons for this to happen.
Regulatory issues, Systematic problems, market conditions.
Although the business outlook is strong, what matters more for intraday/ swing trade is the technical figures on the price chart.
I will be following the price movement closely and take a trade when I get a signal.
I will also post it here, so follow me and stay tuned for the next update.
Post your comments. Let’s have a discussion.
Happy trading. 😊
Co-Authors:
in.tradingview.com/u/Sai_Kumar/
in.tradingview.com/u/sankalp_ray...
Disclaimer:
This is not buy/sell advice. Please do your due diligence before making any trading decision or consult your financial advisor.
Sharing my analysis and thoughts for a stronger and healthier community. Cheers
Is it a good level to buy?
Let's get into the Technical outlook first, then, we will explore the fundamental view of the merged entity.
Technical Outlook:
Bullish signals
• Inverse Head & Shoulder pattern formation
• Breakout of neckline & Retest
Bearish Signals
• Price could not sustain breakout of Major Resistance @ 2506 & trading below Psychological level @ 2500.
• Indicators showing weakness.
The chart has formed an Inverse Head & shoulder pattern.
This pattern is considered a continuation pattern and a breakout above the neckline is a bullish signal.
The Gap up and volume spike was due to the HDFC duo merger news.
Price is back at the breakout level and retesting the neckline support.
One key thing to notice on the chart is the Major S&R line at 2506. The price could not sustain above this level and currently trading below the psychological level of 2500.
Overall Technical outlook – Neutral, Wait for buy/sell signal
For Intraday/ Swing Trade purpose:
Two important levels are - Horizontal Resistance at 2506 & the Neckline Support at 2435.
If the price breaks down below 2435:
Sell at the next red candle or at the retest of breakdown near 2435.
SL - above the Major Resistance 2506.
If the price breaks out above 2506:
Buy at the next green candle or at the retest of breakout near 2506.
SL - Below Neckline support 2435
Target/ Exit Level – Trailing SL
We'll get correct levels only when the breakout happens under suitable conditions. There are multiple possibilities. The price may go up, down, or sideways.
--------------------------------------
Fundamental Outlook:
The HDFC duo has a track record of good business practices and customer service.
The future looks promising for the merged entity.
Reason?
Home Loans are secured loans as the house is kept as collateral.
Banks love this segment as they have the benefit of cash deposits which are available at lower rates, and they can offer cheaper home loans than NBFCs.
But HDFC Bank could not aggressively participate. All they did was assign these home loans to HDFC for a small fee.
Why do you ask? Because they would be directly competing with HDFC if they did.
The merged entity will have the benefit of:
1) Cash deposits at significantly lower rates which will help offer cheaper loans
2) The customer base of HDFC bank
3) HDFC Bank will have the freedom to aggressively sell these loans.
Key Risks:
HDFC Bank has always played safe by keeping a lower concentration of loans in the higher-risk segments. It even survived the collapse of debt-ridden infrastructure companies in the 2000s.
It seems that this strategy is changing. This press release says:
hdfcbank.com/personal/about-us/news-room/press-release/2022/q2/hdfc-limited-and-hdfc-bank-limited-announce-a-transformational-merger
A lot of mergers don’t work as expected. There could be many reasons for this to happen.
Regulatory issues, Systematic problems, market conditions.
Although the business outlook is strong, what matters more for intraday/ swing trade is the technical figures on the price chart.
I will be following the price movement closely and take a trade when I get a signal.
I will also post it here, so follow me and stay tuned for the next update.
Post your comments. Let’s have a discussion.
Happy trading. 😊
Co-Authors:
in.tradingview.com/u/Sai_Kumar/
in.tradingview.com/u/sankalp_ray...
Disclaimer:
This is not buy/sell advice. Please do your due diligence before making any trading decision or consult your financial advisor.
Sharing my analysis and thoughts for a stronger and healthier community. Cheers
הערה
Even though the price crossed below the neckline, we don't have a suitable entry point yet. The chart is forming weak candles with low volumes. We need a strong candle breaking out to either side for a directional trade.הערה
The price is trading below the neckline. It has started taking resistance and forming bigger falling candles, but the conditions on the chart are not suitable.The volumes are muted. In this case, I would wait for a retracement to the neckline and take a short trade if it takes resistance from the line again.
The candles are forming a bullish stalled pattern, so a small retracement is likely.
I’ll wait for the entry point near the neckline, which will give us a good RR ratio. The nearest target is marked on the chart here.
הערה
We did not get an entry today as the price slowly and steadily moved down but with muted volumes.I don't take a trade where volumes are not in favor.
Will keep watching till I get a setup that satisfies my entry conditions.
If any of you have other ideas, please share. I’d love to know how others take a trade.
On a daily timeframe, Looks like the inverse head & should has failed.
When everyone was outrightly bullish on this stock because of the Inverse Head & Shoulder pattern and merger news, we were cautious and our view was neutral because we had given a good weightage to other technical factors.
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