Momentum Analysis & Distribution Phase - Tata ChemicalsPrice Action Analysis:
Analysis of momentum is not about measuring any absolute value of momentum, but in making a comparison of current price action momentum with prior price action momentum. In the month of March price declined from a high of 340 to a low of 197. Price swings saw an acceleration and shows increasing momentum and strengthening of decline. From the low of 197 price reversed and advanced with higher swing lows and high swing highs to record a high at 325. But the price structure of the up move indicates a decelerating momentum. Decreasing slope (the violet line with) shows decreasing speed. Momentum within this price swing is decreasing, showing weakness developing in the price swing.
The swing high at 325 falls within the prior resistance zone of the 340. The present position of price appears to be in a distribution phase with the completion of five internal swings within a mother swing with a swing high at 325 and a swing low at 293, which is also visible as multiple inside bars on a weekly time frame.
Ranges that has formed at the end of a previous trend (uptrend) brings a balance in supply and demand of the market. In such ranges, neither buying nor selling activity will be large enough to create significant movement towards upside or downside. Hence in such type of ranges, Price action moves sideways for an extended time period. Big Institutional Players and Smart Money traders commonly referred as Composite Man by Wyckoff, take significantly large positions in these types of Ranges. One can witness low volumes as price entered the distribution phase but the volume has increased with significant bearish bars in the last leg of the swing.
Trade Plan:
One can initiate a short position in the zone of 300 to 306 with an Initial Stop-Loss of 323. Price can find initial support in the zone of 293. One can expect an equal measured move of the range on price break and close below the mother swing low at 293.
Disclaimer
All investments involve risk, and the past performance of a security, industry, sector, market, financial product, trading strategy, or individual’s trading does not guarantee future results or returns. Investors are fully responsible for any investment decisions they make. Such decisions should be based solely on an evaluation of their financial circumstances, investment objectives, risk tolerance, and liquidity needs.
