Kagi chart set-up suggests buying in Apollo Tyres

Market

 

What is Kagi Chart?

Kagi Charts are used to display the general levels of supply and demand of a particular asset by visualising the price actions through a series of line patterns. These charts are time-independent and help filter out the noise that can occur on other financial charts.

While Kagi Charts do display dates or time on their x-axis, these are in fact markers for the key price action dates and are not part of a normal timescale. The y-axis on the right-hand side is used as the value scale. When a horizontal line joins a rising line with a plunging line it’s known as a ‘shoulder’, while a horizontal line connecting a plunging line with a rising line is known as a ‘waist’. Sometimes the lines are thin; while at other times the lines will be thick and bolded. The thickness of the line changes when the price reached the high or low of the previous vertical line. Also, the direction of the line changes when the price reaches a preset reversal amount.

Why to buy Apollo Tyres?

Traders use the shift from thin (Yin) to thick (Yang) lines (and vice versa) as signals to buy or sell an asset. A Yin-to-Yang shift indicates buy, while a Yang-to-Yin shift indicates sell.

Day-to-day price fluctuations can make it extremely difficult for traders in the financial markets to determine the true trend of an asset. Luckily for traders, methods such as Kagi charting have helped put an end to focusing on unimportant price moves that do not affect future momentum. At first, a Kagi chart can seem like a confusing series of randomly placed lines, but in reality, the movement of each line depends on the price and can be used to generate very profitable trading signals.

Buy signal

Apollo Tyres is currently trading with bullish bias which is indicated by thick green lines on Kagi chart. This script is trading in rising channel plotted by connecting support and resistance points which shows that stock is in rising mode and can be bought until the lower trend line is intact. Recently it has given a breakout of an important pattern on price action called ‘Inverted 3 Buddha Pattern’; denotes prices have given trend reversal breakout and trading higher. Understanding above mentioned price action, one should opt for buy on dip strategy and accumulate this stock.
Image52572020Figure.1. Kagi and Buy signal on Apollo Tyres

Profit booking

As per one of the methods of the Kagi chart, one can use previous ‘waist’ for profit booking. These levels are standing around Rs 135 and should provide immediate resistance on the higher side, moving further Rs 142 will attract more profit bookings. So one can consider profit booking near Rs 135 and higher side towards Rs 142 mark.

Stop loss

Entire bullish view negates on a breach of immediate support zone or the ‘waist’ and in the case of Apollo Tyres, we will consider Rs 99 as a stop-loss level closing basis.

Conclusion

We recommend buying Apollo Tyres around Rs 109 with a stop loss of Rs 99 for higher targets of Rs 135/142 as indicated in the above chart.

Written by Rakesh Sashmal