Learn how I doubled my investment in Kaynes Technology using a simple strategy combining the 20 EMA and RSI on a weekly chart. Discover key insights and trading tips.
One of my favourite strategies revolves around combining the 20 Exponential Moving Average (EMA) and Relative Strength Index (RSI). This approach works well on a weekly chart and has given me excellent returns. Recently, I applied this strategy to the stock of Kaynes Technology Ltd., which I identified through an alert from my stock scanner.
My Simple Trading Strategy
In this strategy, I use two key indicators:
20 Days Exponential Moving Average (EMA):
You can also use the Simple Moving Average (SMA) if preferred.
RSI with a 14-period look-back:
I avoid the
default RSI settings of 70 and 30. Instead, I use 60 and 40.Above 60 the
trend is bullish, and below 40 the trend is bearish.
Here’s how the strategy works on a weekly
chart:
When a stock closes above the 20 EMA,
and the RSI crosses above the 60 line, it signals a bullish trend.
I enter the trade by buying the stock above
the high of the previous week's candle that closed above the 20
EMA.
Kaynes Technology
Example (May 2024)
In May 2024, I got an alert on my scanner for
Kaynes Technology Ltd. The stock had just crossed above the 20 EMA, and the RSI
had also crossed above the 60 line on the weekly chart (see above chart ). This
confirmed my strategy for going long in this stock.
Entry Point:
I entered the stock at Rs.3270, above the high of
the previous week's bullish candle. The chart showed a range breakout from a
consolidation phase, which indicated buyers' interest to invest in the stock. The
stock also broke out above the 20 EMA, and the RSI confirmed the strength by
crossing 60, reinforcing my decision.
Managing Risk
In this strategy, the stop loss is essential. You
can set your stop loss based on:
· A weekly candle
closing below the 20 EMA.
· RSI breaking below
the 60 line.
· Any bearish
chart pattern that forms at resistance.
I adjust my stop loss based on my risk and trade
management system. In this case, my stop loss was flexible but tied to these
factors.
Holding and Exiting
the Trade
After entering the trade, the stock never closed
below the 20 EMA, and the RSI never broke below 60, which meant I could
continue holding. Since this was a medium-term investment strategy, I waited
until the stock faced resistance at its 52-week high of Rs.7822.
I eventually exited the trade at Rs.6764 after
seeing a bearish engulfing pattern form at the resistance
level. The overall market was also showing bearish signals, which made it the
right time to exit. By then, I had more than doubled my investment within 8.5
months.
Profit Breakdown
Here’s how the trade worked out:
· Entry Price: Rs.3270
· Exit Price: Rs.6764
· Shares Purchased: 50
· Initial Investment: Rs.163,500
· Exit Amount: Rs.338,200
· Profit: Rs.338,200 -
Rs.163,500 = Rs.174,700
Within 8.5 months, I made more than double of my
initial investment.
Short-Term Trend vs
Long-Term Potential
However, the stock remains fundamentally
strong and has excellent long-term potential. Kaynes Technology incorporated in
2008 is an IoT solutions enabled integrated electronics manufacturing company
with a market capitalization of Rs.42708 crore. In one year it has gone up by
186%.
The company has delivered a good profit growth of 𝟲𝟴% 𝗖𝗔𝗚𝗥 over last 𝟱 𝘆𝗲𝗮𝗿𝘀. This was the most
vital point to keep watch on the stock. Debtor days have improved from 71.0 to
36.1 days. 𝗣𝗘 is 229, 𝗥𝗢𝗖𝗘 is 11.2%,𝗥𝗢𝗘 is 7.34%,𝗙𝗮𝗰𝗲 𝘃𝗮𝗹𝘂𝗲 is 10.In fact,
Kaynes Technology could achieve more than Rs.9000 in 2025.
Conclusion
By combining simple technical indicators like the
20 EMA and RSI on a weekly chart, I was able to capitalize on a strong trend in
Kaynes Technology Ltd. We always try to keep our chart simple and clear not
using so many indicators and metrics which ultimately create analysis
paralysis. The strategy allowed me to enter at the right time, hold for a
substantial gain, and exit when market conditions changed.
This strategy is very effective in a trending market,
may not give expected returns in high volatile market or in range bound market.
This method not only helped me double my investment but also demonstrated the
power of using reliable technical tools to guide trading decisions.
Disclaimer: The information provided on MoneyWiseMind is for educational and informational purposes only. It is not intended to be financial advice, and you should not rely on it as such. Before making any financial decisions, you should consult a licensed financial advisor.
