Shriram Finance – Potential Breakout or False Alarm?

Mar 21

Technical Overview 📈

✅ Uptrend intact – The stock has been taking support at a long-term trendline and briefly fell out during the correction. Now, it has reclaimed the trendline.
✅ Breakout from a Cup & Handle pattern – A bullish pattern indicating possible upside.
✅ Volume picking up – Still needs more confirmation for strength.
✅ Golden Crossover possible – If recent lows hold, further upside can trigger a 50 & 200 DMA crossover.
✅ Sector strength – The finance sector index is trading above key DMAs, showing resilience.


Fundamental Snapshot 💰

• Revenue Growth: 📈 Increasing YoY
  
• EPS Growth: 📈 Improving
  
• Profit Growth: 🚀 23.4% CAGR over the last 5 years
  
• Healthy Dividend Payout: 21.6%
  
• Market Cap: ₹1,26,653 Cr
  
• Stock P/E: 15.6
  
• Book Value: ₹279
  
• Dividend Yield: 1.34%
  
• ROCE: 11.3% | ROE: 15.9%
  
• Face Value: ₹2
  

⚠️ Risk Factors:

Low Interest Coverage Ratio
Market Volatility – Could still be forming Lower Highs - Lower Lows (LL-LH) structure.
Volume Needs to Improve for stronger confirmation.
(Source: Screener.in)

Risk-Reward Calculation 🎯

1️⃣ Early Entry (₹695.1)
Stop Loss (SL): ₹607 (-12.65%)
Target: ₹890.8 (+28.12%)
Risk-to-Reward (R:R) = 1:2.22 ✅

2️⃣ Safe Entry (₹732.35)
Stop Loss (SL): ₹607 (-17.08%)
Target: ₹890.8 (+21.7%)
Risk-to-Reward (R:R) = 1:1.27 ✅

💡 Conclusion:

Early Entry (1:2.22) offers a better reward potential but has a higher risk of pullback.
Safe Entry (1:1.27) is more conservative but offers a lower reward.

Conclusion & Trading Plan 🎯

🔹 No need to rush in! Gradual accumulation is a wiser approach at this stage.
🔹 Risk Management is Key! This could be a false breakout or a pullback trap. Wait for confirmation.
🔹 Volume confirmation is essential – Without strong volume, the move might fail.

📢 Educational Idea | Not a Trade Recommendation 📢

This setup is shared to alert traders of a potential winner once the market settles. Not all setups play out, and only 5-6 out of 10 might succeed. Hence, risk management and position sizing are key. 📉📊

📢 Disclaimer: This post is for educational purposes only. It is NOT financial advice. All trades carry risk, and market conditions can change. Do your own research and manage risk accordingly.

May 15

Trade closed: stop reached

SL Hit. But keep this on radar.