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  • Writer's pictureraytraceventures

Mazagon Dock Shipbuilders on Sep 07, 2023 | Profit of 92,209



Rationale

The trade was initiated on the below rationale: 1. The price was consolidating for 6 weeks.

2. It broke out of the range on Sep 07 with 13 M volume showed high participation.

3. Defense sector specially shipbuilding companies have been in continuous uptrend for past few months. On the basis of above rationale entry was made in 3 parts.


1st entry was on Sep 07 with 150 quantities at an average price of 1972 2nd entry was done on the same day with 150 quantities at an average price of 2061

3rd entry was done on the next day Sep 08, as the price gapped up by > 4% with 250 quantities at an average price of 2218.


In total, 550 quantities were bought at an average price of 2108.


Below is the screenshot of trade book from my broker, Zerodha.


Positive Market Sentiments and Strong Fundamentals

Mazagon Dock Shipbuilders has given aggressive returns in the past hence, a large position size was executed taking technical and fundamental factors into consideration. In addition, it has inked a deal with US Govt. for the maintenance of their Naval ships. Refer the below link:

This news came out on Sep. 08, and its effect was seen on the stock price it gapped up by > 4% and started rallying to new highs. From the previous day closing price of 2087 it made a high of 2484 which was > 18% spike. As per the price movement, volume and positive fundamentals, it was expected to close the day with strength somewhere between 2400-2500, a little retracement from 2500 level was expected, as it a psychological resistance level and further an expected target of 3000 was defined for profit booking. But it showed some unexpected behavior and reversed by > 10% on the same day and closed very far from the high of the day.


Risk Management

The trade was initiated with a 5.5% risk on the total capital deployed in the trade which was around 65,000 which makes the logical stop loss level at 1990. Although the risk was properly managed but seeing the unusual behavior of price and high volatility the positions were exited. Also, the expectation from this trade was to exit it at 3,000 level which would be 1:7.5 as per risk-to-reward method. But due to price reversal and increased volatility the positions were exited with 1:1.4 risk-to-reward. But if you will observe a target of 1:3 was achieved within 2 days which was > 17% ROI on the capital deployed. I may have slipped some profit in this trade but when I sense some unusual behavior of price then I prefer to exit the positions, stay on the sidelines and analyze later because risk management and preserving the capital are the priorities for me.


Conclusion

The positions were exited at 2276 with a profit of 92,209 which was ~8% of the capital deployed. Below is the screenshot of P&L from my broker.


Learning It is good idea to take time into account when the trade is under execution with the ROI. For example this trade gave us > 17% ROI within 2 days hence, it made sense to at least exit 50-60% of the positions if we get good ROI in short span of time and hold the rest to ride the momentum further.


Thank you for giving your time, I hope you learnt from the actual execution. For more such learnings you can join my community of ~ 292 stock market enthusiasts and follow me on Twitter(X) where I put interesting charts for educational purpose during live market hours.

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