After reaching a trend climax 2020 july followed by a unsustainable upthrust a month later reliance has been a laggard in every structured portfolio whether investors or mutual funds.
If we carefully observe the price structure- the trading range- the action shows multiple tests of supply- the 2nd secondary test at 1827.45 limit started off a buying spree which thrusted the price back to the resistance of the trading range formed by the buying climax at 2197.80.The action followed down to another test of supply april-may2021 failing to make a new low. The selling was exhausted at a higher price level 1875.45 followed by another buying wave in may.
The next test formed a significant higher low at 2013.10 ( precisely 10% higher than the lowes early in the trading range). An interesting point to note- a resistance at 2086 was formed in November and the action found difficult to sustain above it until 8 months later 2021june.
The repeated supply test not able to go lower than the preceding one- higher low formation- is a classical phenomenon of supply absorption. The 2 rallies we saw so far climaxing at the resistance were backed by good demand bars- indicating the scrip is being bought into strong hands. Finally the general volume inside the trading range has shown a steady decline indicating lesser volatility and lesser exchange of hands. The decline in volume notably started since the buying waves commenced in February after the 2nd secondary test.
The past 2 weeks of action has not shown significant pick up of demand although this week the price has opened above the highs of the previous two. The scrip might be consolidating withtin the trading range for sometime more but this feels like a last point of support building up in the trading range.
Once the base formation is complete reliance can take nifty to higher levels.
With most of the scrips in my portfolio approaching lesser upward potential after the current run up, a higher allocation on large caps like reliance certainly should help with better risk management in my portfolio.