SWANENERGY BREAKOUT

28 Tem

Swan Energy Limited (SEL) was originally incorporated in 1909 as Swan Mills Ltd. (SML), a manufacturer and marketer of cotton and polyester textile products in India. Over the years, it has diversified into real estate and is developing a floating storage and regasification unit-based liquid natural gas (LNG) import terminal at Jafrabad in Gujarat.

FUNDAMENTALS

Pros

1. Strong sales growth of 249%.
   
2. Significant profit growth of 584%.
   
3. Good liquidity with a current ratio of 3.13.
   
4. Manageable debt with a debt-to-equity ratio of 0.55.
   
5. Diversified business into real estate and LNG.
   
6. Long-standing market presence since 1909.
   

Cons

1. High P/E ratio of 76.2, suggesting overvaluation.
   
2. Low dividend yield of 0.01%.
   
3. Modest return ratios: ROCE 8.28% and ROE 7.03%.
   
4. High price-to-book ratio of 3.65.
   
5. Total debt of ₹3,440 crore.
   
6. Exposure to industry volatility in the LNG sector.
   

Overall financial strength : 73/100

TECHNICALS

1. Prices are above 21, 50, 200 day EMA and 200 day MA.
   
2. Stock corrected nearly 40%+ from the top.
   
3. Weak Correction is suggesting that the supply is fading.
   
4. RSI : 63; indicating buying momentum.
   
5. MACD Crossover on Daily & Weekly time frame.
   
6. Stock was trading in a range for 4 months and finally broke out and retested the level of 680–665.
   
7. A teeny-tiny rounding bottom pattern formation.
   

ACTION

• Above 750, it's a big base breakout, so one can capitalise on the momentum for a target of 795 (short-term positional).
  
• For a little longer horizon, can hold it for 892.65 and 987 levels (fundamentally good company)
  
• Aggressive traders can deploy small portion of capital above 750 if crosses with good volume spike.
  
• Safe ones can wait for a retest at 747–755 level.
  
• Now as per technical analysis, SL should be placed at around 645–650ish, but the RR isn't too fair for short term traders, so they can either place SL below the 21-day EMA.
  

This is just my analysis and research. I shall not be responsible for anyone's loss.

Happy Trading :)