Technical View

Vodafone Idea : Zero to Hero?


Are you still stuck with shares of Idea bought at higher prices and its dragging your portfolio return down? Then this blog might bring you some relief. And if you’re someone who is looking to build a portfolio after the crash in hope of finding a good outperformer then do read it till the last.

I remember 3-4 years back Idea was a popular share among the traders as well as among the investor community. Everyone was talking about having it in their portfolio as it fell from all time high and investors were looking at this as a good opportunity to grab the shares at lower prices. But the fate of Idea turned with the emergence of Mukesh Ambani’s Jio. Jio’s popularity gave a dent in the market share of almost all the major telecom companies including Idea and that made share prices plunge even more. At the time of writing this blog, the share price is trading at ₹5.80 on the NSE stock exchange.

Can it turn out to be a Multibagger??

Well that’s a billion dollar question and nobody has an answer to it. But the stock market is all about finding a stock with the highest probability of going in our favor with a strict risk management system. But before I dive into explaining my logic of considering Idea using charts & technical analysis, first take a look at the market scenario and try to decode it using a common sense approach.

  • Currently there are only 3 major companies in the telecom sector, namely Airtel, Jio & Idea (now Vodafone-Idea). With the merger, Vodafone Idea Ltd. have become the largest telecom company in India by subscribers and by revenue.
  • Lack of options for the customers is also an advantage to the company
  • Also it’s not easy for any new player to enter in this sector because of the requirement of huge investment that acts as an entry barrier.
  • With the rapid advancement in technology we can already see how fast we are shifting to digital platforms whether it is banking, govt. services, education, shopping or entertainment and in the future I can’t imagine anything that won’t be possible through the internet.
  • And now the 5G is in the pipeline and unlike last time, I think this time every player in the sector is going to bet on this technology.

So I am seeing a huge future for the telecom companies and this blog is about Idea but all these points are true for other players too. With keeping all these in mind, now let’s shift our focus to my favorite section i.e. CHARTS.

Price Pattern

What caught my eye is the amount of accumulation that is going on at such lower prices. Definitely big players are taking interest in the stock. There is also a small triangle pattern formation with RSI showing bullish divergence on weekly time frame. If the triangle breaks out to the upside, this will add to our conviction.

Click on chart to enlarge view.

Relative Strength Analysis

No analysis is complete without having a look at line charts. I consider line charts best from an analysis point of view as price patterns are more crisp and clear because of lack of noise unlike candlestick charts. Even sometimes line charts can give early signals like in the chart below. There is also a triangle pattern on a weekly time frame and it has already given a breakout. And this adds even more interest in the stock.

Click on chart to enlarge view

Now it’s time to have a look at one of the most important study i.e. Relative Strength Analysis (don’t confuse it with Relative Strength Index or RSI). It is a comparison of one security with the other. Here we have compared Idea with Nifty 500. A possible breakout is visible from a small sideways channel. This means that Idea is starting to outperform the Nifty 500 Index.

Click on chart to enlarge view. 


All these suggest that there may be an opportunity in the stock. You may keep this stock in your radar. If it crosses & sustains above 34 then there is real upside potential. A long term investor should always look to diversify their portfolio in order to reduce the unsystematic risk and the telecom sector is the one you should definitely keep an eye on. As I have said in the starting a strong risk management system should be in place no matter you are a trader or an investor. Treat stock market like a business and not a gamble. Always keep your eyes open for the right opportunity at the right time to catch the winning trend.

Happy Investing!!

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