How many times does one get a chance in one lifetime to invest in the restoration of an erstwhile paradise? For one, to find such an opportunity one must be first inside that ex-paradise that today must be nothing less than devastated.
History of investing is full of rock-solid evidence, statistically as well as anthropologically that geographies that have been decimated in prolonged socio-political-economic strife when return to peace, return to prosperity in bigger, faster and more bountiful manner. Akin to how the bumper crops arise in deserts that find a canal diverted through them or after the hinterland of a flood swamping river finds new harvest, investing at the cusp of a new dawn in socio-political reversals has the potential for a huge gain. Look at the outlandish returns in Vietnam or Sri Lanka, for an example!
One chart caught our eyes after sustained value destruction over the years. This chart is of the stock-prices of the Jammu & Kashmir Bank.
We explain ahead why this long-term decline is now almost over. Why any time a mega uptrend can erupt. Why at least doubling your money in a very short period is likely on the horizon whether or whether not a 10 or 20 bagger investing success arises.
Before that, let us look at the bountiful macro setup, first.
Only 15 percent of the total shareholding of this special bank is out there with non-institutional non-promoter shareholders. A paucity or scarcity scenario is in-built and once the positive value creation cycle will kick-in the valuation expansion too will thus happen far more rapidly due to this shareholding structure.
If so many Indians are today eyeing the possibility of buying land in Jammu & Kashmir which has hardly appreciated in value even in seventy years despite the blessing of nature to turn this geography into a literal paradise for tourism, we have a surrogate and a much more salubrious surrogate available. The listed stock of J&K Bank.
If the surmise comes right that now Kashmir will return to mainstream & free and fair exchange of commerce, assets and wealth with the rest of India will materialise then whenever this happens, the SGDP or State Gross Domestic Product Growth of Kashmir may turn to be the fastest growing in India. J&K Bank is the best proxy to bet on the restoration of our very own paradise on earth.
This bank is today trading at the same prices it was trading ten years ago. The price today is around one-fourth of its book value. Almost as if buying a piece of a paradise about to be restored at 1/4
th its present value. Add to that a question what would be its value when the paradise begins to be restored? More imaginative theses building is left to the investor for undertaking their own private due diligence. Let’s focus on the chart wherein technical analysis triggers us to begin buying into this stock.
The enclosed daily chart shows that a terminal triangle pattern is being formed now. A terminal triangle happens at the end of significant big moves & forebodes that the next trend in the opposite direction is likely to have a potential for big movement. This pattern suggests soon, as we see, J&K Bank begin to trade above 31 areas, a buy is triggered with a minimum immediate goal of going to 62. That’s for the short term.
Now let us look at the long-term chart shifting our view to the weekly chart just from the all-time high seen in 2014 till date. This chart shows a double three correction pattern is nearing completion.
A double three is comprised of two sets of WXYXZ waves. Each set forms a larger degree W and Y marked with black and white letters and connected by a larger degree X wave. The smaller degree WXYXZ has each leg comprised of only three-legged waves and not five-legged waves. Such a less than usual deep correction signifies that market on a specific symbol continued a deep decline but with ongoing reluctance and it also signifies the prevailing fractal of prices for the real long run is still a five wave structure on super cycle degree. So the inherent characteristics of the J&K Bank stock price have all the ingredients of a 5 or 10 year-long bull market again, ahead. This time this new young bull of a chart will likely have the theme of paradise restored!
Caveat: Long-term investing must be regularly monitored for ongoing performance. We cannot advise taking an outsized position even if the macro cusp appears like that of a journey from prolonged hell to at least a calm and beautiful Kashmir if not a new paradise. Risk-taking must be consistent with the risk tolerance of a specific investor and not merely on the proposed investment theses. So, size your investments keeping the immediate horizon of a buy above 31 with a stop loss below 28 and the initial goal of 62. We shall review and update if indeed the initial move of hope from now to 60 rupees arise has the internal signatures of a five-wave structure to solidify the theses of a paradise restoration the markets may have begun believing when such a move materialises. Therefore size your initial exposure with the goal of review and not exit at 62 and a stop loss that’s about 5 percent of current market price, since you do not wish to experience either: missing the journey to paradise or getting stuck in hell!
Sushil Kedia is the founder of Kedianomics.