Dalmia Sugars - How to pick the Right Entry Price !!!

4 set

On Aug 29, there was a Post market News being circulated across all Social Media Channels that the Govt has removed the Cap on sugar Diversion for Ethanol Production. As an instinctive reaction, everyone suggested to start loading Sugar Stocks and it would rally immediately

https://www.moneycontrol.com/news/business/commodities/govt-removes-cap-on-sugar-diversion-for-ethanol-production-for-2024-25-12810117.html

But in Reality - only on Friday there was a mad rush on market opening which waded-off before close of the day and all Sugar stocks fell from their opening price and from then, most of the sugar stocks continued to fall.

This is the Reality of NEWS Based Trading... If the market always reacts in the same direction as mentioned in the NEWS, then the entire world would be filled by Warren Buffets :)

One of my friend was seeking advice on Dalmia Sugars - given the mad rush. Here is the detailed analysis..... Not just for Sugar Sector, Not just for Dalmia... This is how every stock needs to be analyzed...

1. On Quarterly chart - the price is travelling within a Life-Long Parallel Channel
2. The price repeatedly formed Rounding Bottom structures (Cup pattern)
3. The Depth of the Cup each time has been -80% from the respective peak levels
4. From Jan 2020 to Apr 2021 - the price had a massive Blast of 1,155% from Rs. 39.75 to Rs. Rs. 499
5. The price is going sideways with minimal dip (an Inverted Head and Shoulders pattern / small Rounding Bottom) from Apr 2021 till date - During this period - the price attempted several times to Break out of the Previous High 500 but though it had 2 instances of breakout, it could not sustain above 500
6. The Current Market is News driven, purely to the Panic sensation of over valuation. Although I don't agree that Market really works on Valuation, the Crooked Media Analysts are constantly feeding Panic to public that Market is due for a Crash / Correction

Although I am strong on my view that there will be NO MAJOR CORRECTION atleast until Apr 2028, I don't discount the fact that there will be intermediately Blips - strong blips of 1-2% down or even 3-4% down in a day which will recover soon

But NOT all stocks will recover from these Blips. Especially the ones like Dalmia Sugars Because of the following reasons

1. 500 Level has been super strong
2. Stock has already given massive returns and in consolidation mode
3. In the previous 2 instances - the stock always fell down to the previous Rounding Bottom BO zone and also tested the Bottom of the Parallel Channel
4. If the last week's news could not break out of the 499 Resistance, then it won't be easy now. Even if it breaks above 500, there are 2 more resistances 545 and 570

Unless and Until 570 is fully broken out and sustained for 1 full week, the price WILL fall back below 500 anytime soon. All it needs a single day of market volatility - due to some NEWS even if it is NOT related to Sugar sector. If the Small Cap / Mid Cap index falls on a day, then 500 Support would be broken down and then the price would fall all the way down to the previous support level of 202 which is -56% lower than current level

When it reaches 202 - it would touch the bottom of the Parallel Channel and bounce back and continue the previous patterns

For now, the Risk of Falling based on NEWS is much higher given there are 3 back to back resistances the price has to negotiate (500, 545, 570) in near term

Even if the Sector starts a rally, Dalmia sugar might see a drag unless 570 is taken out. So, even if there is a Sugar Rush - better NOT to Rush on Dalmia Sugars. There are other sugar stocks to look into

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We follow an Affective Neuroscientific Approach for Market Analysis - the branch of Science that deals with Human Emotions and Reactions based on emotions. Instead of controlling our Psychology, if we understand and be prepared to handle the larger market player's Emotional reactions - we improve our success rate

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