Bullish Guppy Multiple Moving Average signals buy on Sudarshan Chemical; here#39;s why
The moving averages can be utilised to determine trends. Rising moving average implies a rising trend; whereas falling moving average trend indicates falling trend.
Developed by Australian trader Daryl Guppy, the Guppy Multiple Moving Average (GMMA) indicator provides an interesting method to analyse a market’s behavior by using 12 different exponential moving averages (EMAs).
What is a ‘Guppy Multiple Moving Average (GMMA)’?
- The Guppy Multiple Moving Average (GMMA) is a technical indicator that identifies changing trends by combining two groups of moving averages with differing time periods. The long-term EMAs represent the interests and behaviors of investors that have taken a long-term approach to a given market. Meanwhile, the short-term EMAs represent traders, or speculators, who are attempting to capture short-term profits.
- Guppy groups the EMAs into two categories. The first six are considered short-term and the other six are considered long-term. The short-term EMAs used are 3, 5, 8, 10, 12, and 18. The long-term EMAs used are 30, 35, 40, 45, 50, and 60.
- When the shorter moving average crosses over the long-term moving average, the trend is said to be up creating a buy signal.
Why to Buy Sudarshan Chemical Industries Limited (SUDARSCHEM)?
After making a base near Rs 300-320 zone, Sudarshan Chemical Industries is trading with positive bias; whereas it has also given a breakout of immediate resistance placed around Rs 350 levels. Bullish MA crossover of 21 EMA & 13 EMA has also shown positive momentum in the stock. As long as it is sustaining above 200 DMA placed around Rs 330 levels, one should opt for ‘Buy on Dip’ strategy.
Figure.1. GMMA and Buy signal on Sudarshan Chemical
- GMMA short-term averages have crossed over all long-term moving averages indicating that bullish bias will continue.
- Short term moving average 13 EMA defines short-term trend which is rising and placed around Rs 362 marks. Mid- term moving average 21 EMA defines mid-term trend and it is rising and placed around Rs 350. Bullish crossover of 21*13 EMA is giving a buy signal.
- Recent close prices (Rs 372) are trading above the long-term moving average (200 DMA) placed around Rs 330 levels.
- Major resistance breakout is above Rs 385 levels, which is giving additional confirmation of bullish momentum.
Whenever price candle will be near previous swing high which is near Rs 425 levels.
Entire bullish view negates on breaching of the last long-term EMA (60 EMA) of GMMA and one should exit from long position. In the case of SUDARSHAN, it is placed around Rs 335 levels.
We recommend buying Sudarshan Chemical Industries Limited (SUDARSCHEM) around Rs 370 levels with a stop loss of Rs 335 on closing basis for higher targets of Rs 425 as indicated in above chart.
(The author is Head – Technical & Derivative Research, Narnolia Financial Advisors Ltd.)
Disclosure: Narnolia Financial Advisors/Analyst (s) does/do not have any holding in the stocks discussed but these stocks may have been recommended to clients in the past. Clients of Narnolia Financial Advisors Ltd. may be holding aforesaid stocks.
The stocks recommended are based on our analysis which is based on information obtained from public sources and sources believed to be reliable, but no independent verification has been made nor is its accuracy or completeness guaranteed. The views expressed in this research report accurately reflect the personal views of the analyst(s) about the subject securities or issues, and no part of the compensation of the research analyst(s) was, is, or will be directly or indirectly related to the specific recommendations and views expressed by research analyst(s) in this report.
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