How to find blockbuster stocks like IRFC, HUDCO and IREDA using technical analysis

In the ever-evolving world of stock trading, identifying and capturing blockbuster stocks requires a keen eye, strategic analysis, and a solid understanding of market dynamics. Successful traders often employ a combination of technical and fundamental analysis to maximise their chances of hitting the jackpot.

In this article, we unveil a proven technique that has yielded impressive results for many savvy investors.

Initial Momentum

The first step in this strategy involves filtering out stocks that exhibit a remarkable surge of 50% to 70% or more in less than two months. This rapid price movement signals strong momentum and potential for further gains. Investors can use various screeners and tools to identify these high-performing stocks, setting the stage for further analysis.

Volume Speakes

Volume analysis is crucial in assessing the strength of a stock’s trend. The second criterion involves ensuring that the volume on green days significantly surpasses the volume on red days. This indicates a healthy and sustainable uptrend, driven by strong buying interest. High volume during upward movements suggests conviction among investors, reinforcing the likelihood of continued price appreciation.

Accumulation

Once potential candidates are identified, the third step is to patiently wait for the formation of a solid base. This could take the form of a VCP (Volatility Contraction Pattern) or a flat base, among others. These base formations act as a launching pad for the next leg up, providing traders with an entry point when the stock is poised for a breakout.

Trend is our friend

To enhance the probability of success, it’s essential to align stock selections with trending sectors. Keeping an eye on sectors experiencing strong momentum, such as PSU banks or solar stocks, can provide an additional advantage. This sectoral alignment complements the stock’s individual strength, increasing the likelihood of outsized returns.

Favourable Risk Reward

Entering the trade with a disciplined approach is crucial. Implementing a maximum 7-8% stop loss helps manage risk and protect capital. This conservative approach allows for swift exits in case the trade doesn’t unfold as expected, preserving capital for future opportunities.

EMA Strategy

A key technical indicator in this strategy is the 21-day exponential moving average (EMA). Ensuring that the stock has predominantly stayed above this average reinforces the uptrend, confirming sustained positive momentum.

Lastly, the strategy capitalizes on the broader market conditions. During bull markets, the perfect selection of stocks can transform a year’s worth of gains into just a few months. Monitoring market trends and adjusting the strategy accordingly is a crucial element in maximizing returns.

Examples,

1. Stocks rising by at least 50% in less than two months
2. Green candle volume is higher than red candle volume.
3. Base formation, including flat, VCP, etc.
4. To gain an extra edge, look into industries that are trending (PSU banks, Solar Stocks).
5. Maximum 7-8% Stoploss at Entry
6. For the most part, the stock should have remained above the 21 ema.
7. A bull market with the right stocks may double your money in a few months.
8. The majority of stocks reported strong earnings, which increased the price even more.

Indian Railway Finance Corp. Ltd

Indian Renewable Energy Development Agency Ltd

Housing & Urban Development Corp. Ltd

It’s worth noting that many stocks that have thrived under this strategy have also posted robust earnings. Strong fundamentals often catalyse sustained upward movement, further validating the potential for blockbuster returns.

Catching blockbuster stocks requires a systematic approach that combines technical analysis, sectoral awareness, and risk management. By following these steps, investors can position themselves to identify and capitalize on the next big winners in the stock market. Remember, patience and discipline are key ingredients in this recipe for success.

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. The information is based on various secondary sources on the internet and is subject to change. Please consult with a financial expert before making investment decisions.