Alkyl Amines - Turning Point for the NEXT BULL CYCLE?

Company Snapshot: Established in 1979, Alkyl Amines stands as a prominent producer of aliphatic amines in India. The company caters to a diverse range of sectors, including pharmaceuticals, agrochemicals, water treatment chemicals, rubber chemicals, mining, foundry chemicals, and surfactants.

The company boasts a commendable return on equity (ROE) history, with a three-year ROE of 19.0%. Additionally, it maintains a positive cash flow, operates without debt, and has consistently upheld a robust dividend payout ratio of 26.5%.

Technical Analysis: If you refer to the chart, the stock completed its bull cycle phase(marked wave (5)) at 4749 in July 2021.Since then it has been in the bear phase and has corrected almost 60% from the top. Lets analyze the bear cycle and check if we can identify the turning point using Elliot wave analysis & price action

For a detailed explanation on Elliot waves basics, please refer to the following link:https://www.investopedia.com/terms/e/elliottwavetheory.asp


Referring to the article linked above, the correction generally occurs in an ABC pattern. We are currently observing a ZIG ZAG correction. This particular correction comprises five waves in Wave A, followed by Wave B, which contains three sub-waves and typically retraces Wave A by 38%. Wave C also consists of five minor sub-waves. Analyzing the stock, it is evident that these principles are applicable. Furthermore, Wave C has formed an ending diagonal (ED) (it appears like a falling wedge)

Now, let us examine the indicators within Wave C that may imply a potential trend reversal.

1. The sub-waves (12345) of Wave C comprises three sub-waves, reinforcing our theory that it is indeed an ED. The minor wave 5 is characterized by a steep and sharp trajectory, which is a common trait of the minor fifth wave in an ED. The length of minor wave 5 is projected to fall between 50% and 61.8% of the distance from wave (0-3). Additionally, the length of Wave 3 is not the shortest.
2. Candle Stick Pattern: The market exhibited a gap up near the minor wave 5 in the Elliott Wave structure, which generally signifies the involvement of professional traders. Notably, I observed the confirmation of a hammer candle precisely at the double bottom.

3. The Relative Strength Index (RSI) is demonstrating a bullish divergence from the bottom of wave 3 to the bottom of wave 5.

How should one approach this trade? The traditional method remains applicable. An entry could be executed in phases, with an initial portion near the current price level and the remainder contingent upon a breakout test of the Elliott Wave channel, particularly when conditions are favorable.

Given that Nifty and Bank Nifty are approaching all-time highs, it would be prudent to maintain a relatively small position size, as any significant decline in the indices could lead to whipsaws that may trigger our stop-loss orders. We can always strategize to re-enter in such situations

The wave counts, stop loss, and target levels are illustrated on the accompanying chart.

DISCLAIMER: It is important to note that the information provided in this analysis is intended solely for educational purposes. It is strongly advised to consult with a financial advisor prior to making any investment decisions. I cannot be held responsible for any financial losses that may occur.