Punj Lloyd for Quick Gain?

While scanning through few midcap charts, Punj Lloyd grabbed my attention because of clear inverse head and shoulder formation on daily chart. It offers good trading opportunity with stop loss at 24.5 with target around 34. I looked at few other competitors’ charts for some more cues. And competitors like Sadbhav Engineering and BGR Energy are bottoming as well.

Punj Lloyd showing signs of reversal

Let’s take a look at the big picture to see if we can spot anything interesting there. The chart below shows monthly time frame for Punj. It has been in downward wedge from the highs of 2007. And in August, it actually broke the wedge downwards. But judging by the price action for September and October, it is again inside the wedge indicating possible false breakdown signal. Now, it may try to do exact reverse in the coming days by moving towards the upper end of the wedge!

Falling Wedge of Punj

While we want to believe only what we see on the chart, always keep in mind that days from October 13 to October 30 are notorious for sharp movements for entire market.

October Seasonality

During my last post, I mentioned an interesting data pattern which I call "Revenge of Three Bears". Now, let's find out which days are more bearish than others in October.

Most bearish days of October

From the chart above, it’s pretty clear that if October is going to end in red then the most historically bearish period, that is 2nd half of the October is the time when market may show weakness. One can trade this weakness only when price pattern confirms the same.

I’ll end this post by quoting Salil Mehta about October seasonality in his post Our autumn of discontent.

"There is a statistically strong historical repetition of market crashes, occurring in the months near October (e.g., September through November).  But so too do crashes more often occur on Mondays, for any month of the year."

Be careful out there!