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'Andrew Pitchfork breakout signal suggests buying opportunity in PVR'

Looking at the lead indicator setup, buy PVR only above the Rs 1,500-mark for higher targets.

January 11, 2021 / 11:42 AM IST
PVR | Gemasia bought 4.25 lakh equity shares at Rs 1,265.67 per share on the NSE.

PVR | Gemasia bought 4.25 lakh equity shares at Rs 1,265.67 per share on the NSE.

 
 
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Andrew’s Pitchfork is one of the oldest and leading indicators in technical analysis. It uses three parallel trend lines to identify possible levels of support and resistance as well as potential breakout and breakdown levels.

This indicator was developed by Alan Andrews and uses trend lines that are created by selecting three points at the start of confirmed trends, higher or lower. This is achieved by placing the points at three consecutive peaks and troughs. Once the points are in place, a straight line that denotes the “median line” is drawn from the first point through the midpoint between the upper and lower points. Upper and lower trend lines are then drawn parallel to the median line.

Traders could enter a long position when the price of a security reaches the bottom trend line of the indicator. Conversely, a short position might be undertaken when the price hits the upper trend line, however, one needs to check the existing trend before taking action.

Traders may consider booking partial or all profits when the security's price reaches the opposite side of the pitchfork. Before entering a position, traders should ensure that support and resistance is stalling at these levels. Price should reach the median trend line frequently when a security is trending and when that doesn’t happen, it may indicate an acceleration in the trend.

Why to buy PVR Limited?

The steepness of the Pitchfork channel depends on the placement of the three drawing points, particularly Point 1, which is the start of the median line. Even though point one usually starts with a reaction high or low, it is sometimes necessary to adjust Point 1 to ensure a realistic price channel.

Close

Unfortunately, there are no hard rules for point placement

PVR Limited is trading in an uptrend by making higher high and higher low since last two-three months. At the same time, it has been trading above crucial moving averages 20 and 50 DMAs, indicating that the bullish bias will continue.

The stock recently retraced towards the median line of downward sloping Andrew pitchfork and prices sustaining near Rs 1,500. Moreover, it took support from the lower trend line of upward sloping pitchfork and trading higher towards the median line of pitchfork as indicated in the chart.

Any decisive move above the downwards sloping median line will confirm the breakout and prices will start trading towards the upper trend line of the pitchfork. Looking at the lead indicator setup, we suggest buying PVR only above Rs 1,500 mark for higher targets.

Capture

Buy Signal

1. Prices are trading above the lower trend line of the upwards sloping pitchfork.
2. Prices are trading above the short-term moving average 20-day SMA, which is placed around Rs 1,378 .
3. Prices are trading above the mid- term moving average 50-day SMA placed at around Rs 1,314.

4. Decent volume participation while forming a bullish candle has also given additional confirmation.

Profit-booking

Whenever prices reach the upper trend line of downward sloping Andrew pitchfork, it is the ideal time to book profits. In the case of PVR, it is Rs 1,880.

Stop Loss:

The entire bullish view negates on breaching of the previous swing low. However, in the case of PVR, it is standing around the 1,275-mark.

Conclusion

We recommend buying PVR Limited above Rs 1,500, with a stop loss of Rs 1,275 for a higher target of Rs 1,880 levels as indicated in the above chart.

The author is Head-Technical Research, Narnolia Financial Advisors Ltd.

Disclaimer: The views and investment tips expressed by experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.
Shabbir Kayyumi is the Head of Technical & Derivative Research at Narnolia Financial Advisors. He has rich experience in Technical Analysis across Equities, Commodities, Global Indices and Global Currencies. His strength lies in Elliott wave and Neo Wave theory while he is equally proficient in Candlestick patterns, Fibonacci, price projection, classical Dow Theory, and inter market analysis for interpreting market trends.
first published: Jan 11, 2021 11:42 am

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