The worst of the ‘corona dump’ is away for the aviation stocks as of now. Transportation is what drives the economy, be it for a product or human capital. The world is slowly opening, flights are resuming across countries while people are slowly adapting to the new normal. Chart history tells us that trading aviation stocks from India is not a harmonious affair for reasons are plenty. A highly regulated industry, falling margins, many of them perpetual loss-making machines, rising cost of travel for consumers, etc are some of the key news that is always on in media reporting. It is as if airlines were meant to be cash flow negative businesses.
To add to further woes of traders who trade this sector, a couple of months back Warren Buffett said he has dumped his entire stake in US airline companies, sending shockwaves to the industry across the world. Berkshire Hathaway had held sizable positions in the major US airlines, including an 11 per cent stake in Delta Air Lines, 10 per cent of American Airlines, 10 per cent of Southwest Airlines and 9 per cent of United Airlines at the end of 2019, according to its annual report and company filings. This led to further slide to the price of Indigo and Spicejet. Bears just a reason to dump.
So, let us see what is next with the key aviation stocks of India via charts.
- Vistara (TAAL Enterprises Ltd.)
From the first look of the charts (this one is BSE’s), I would certainly avoid trading this stock. Even on a weekly timeframe, long wicks and frequent gaps between candles tell me that liquidity is poor for this stock in the market and trade executions will be poor with beyond tolerable slippages from your broker.
Choppy market here with price bouncing between a channel wherein price is forming lower highs and lower lows since the genesis of this stock. Now we are in completion of wave 4 and it certainly looks top heavy wherein bears are about to turn the sentiment round about as Money Flow Indicator (MFI) also signals that this stock is currently overbought. Most likely wave 4 ends when a sharp wick touches the channel overheard resistance and then continues to slide into wave 5 (downwards) towards newer lows in a few months.
A bullish flipside would a wave 5 signalling a breakout from the channel but then there must be some serious change in fundamentals or the regulatory side which I don’t see it happening in this year. For the curious mind this new trigger has to be as magnanimous as a the govt bailing out private players or a fresh new round of FDI in the aviation sector or Rata Tata signalling he is buying back the shares, etc which in all likelihood are events which will never see the light of the day.
If I were trading this stock, I would like to be a permabear for Vistara. I still love you Vistara, you treat me good in those business class seats, and your staff is better trained too compared to other Indian airlines.
2. Spicejet Ltd
Spicejet is the number 2 player in the Indian skies as you are aware of.
From a market news perspective nothing significant has happened recently to activate the bulls. Bears are still in control as SpiceJet Q1 results come in as it reports net loss of Rs 593 crore.
Let us see what the charts have to tell us.
For a decade we were trapped in a descending triangle pattern. Imagine waiting for 10 years for a breakout. I would leave trading forever. In summary this is what happened in 10 years:
Bulls were in control from 2015 to 2017 and then one again tried to take control in June 2019 but failed miserably. The bearish ‘double top’ the later formed a bearish M shaped pattern from March 2017 to March 2020.
I think we have completed the target for the double top from a “measured move” perspective. Check the chart in HD (hyperlinked) for a better understanding. But the key concern is the declining volume since 2016. After a lull period of trading volume, the breakout in volume usually happens with a lot of inertia. You will more likely see a big dildo volume candle either red or green to bring some thrill back in the market. But I think we are done with enough selling; we are down 80% from the market top at Rs156.90 to the recent all-time low of Rs30.90. Currently we are at Rs51.50.
For a bullish narrative I would enter post Rs100 as the strong resistance stands at RS152. The region of Rs90-Rs150 is the territory to trade for quick gains. But it is worth keeping a tab on the charts in case the bears keep selling from hereon then a golden chance to buy this stock in the range of Rs11-Rs22 will come again.
3. Indigo (Interglobe Aviation Ltd)
Indigo chart tells us it is always a pleasure to trade this stock. Looks like the market loves it and I guess it is rightly so because it is the market leader. We have had the most bullish candle imprinted this August since the genesis of this stock. Smart money bought and told the retail trader a month after that it’s a buy signal, wtf right? Kotak Institutional upgrades InterGlobe Aviation to ‘buy’.
The key to spot early trends is checking volume and not price. Volume precedes first, but you already know that, yet you don’t apply it. Cause you are too much focused in marker moves monitoring by those silly apps of yours. Get a TradingView subscription, get a life.
Bears came in action in September 2019 and we witnessed the validation of the bearish ‘rising wedge’ pattern. Bulls were again caught on the wrong side of the trade early this year as the bull trap was aided by the epic ‘corona dump’.
The key resistance is at Rs1500 and I would trade it once a couple of candle on the daily validate it. While it’s evident that bulls are back for Indigo and this time, we are reaching for all time highs for sure. Here is an analogy.
The mother of all support is resting at Rs765. We have already had triple bottoms, one in Feb 2016 the second in October 2018 and the most recent in March 2020.
In the first instance, we hit a gain of 116% from all time low from the 1st bottom.
In the second instance, we hit a peak gain of 172% from all time low from the 2nd bottom.
There was a difference of 26% between the last two all time highs i.e. comparing instance 1 and 2. And if fractals follow symmetry this time too, then we are peaking 203% from the current all time low formed at the triple bottom. But when do we reach is something we don’t know yet. In the 1st case price took 798 days to reach all time high (ATH) from the all-time low (ATL). In the 2nd instance we took just 1 year to do it. So, in the current 3rd instance we will most likely see the new ATH in 360-760days too. Fingers crossed.
Overall, this is the most bullish stocks in the sector right now.
4. Global Vectra Helicorp
One of the least talked about aviation stocks of India is Global Vectra. From Wikipedia: Global Vectra Helicorp is India’s largest private helicopter company. It has fleet of 29 aircraft ranging from small light helicopters to medium-sized twin engined helicopters seating 4 to 15 passengers. The Company is promoted by Non-resident Indian businessman Ravi Rishi.
A simple google search lends the top news results:
When there is blood on the markets, you capitulate right? The chart tells so. Screw those fundamental analysts. But before we analyze the chart let us visit a beautiful pattern from the lovely science (or art) of technical analysis. It is called ‘cup and handle’.
So now that you have some context, what do you see happening to Global Vectra?
There are two bullish reversal patterns in the making.
On a shorter scale, falling wedge. A successful break over Rs81 and bulls will charge it to Rs165.
On a slightly larger timeframe, the epic cup and handle. If the bulls sustain the rally from the Rs165 range, then we will see quick price action to validating the cup and handle target of Rs 350-Rs356 printing a new all-time high for the stock.
Bears, your time is coming soon.
Does it get any easier than this? Go make bank boys.
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