Thursday, June 7, 2007

Technical review of select India stocks for medium term

Overview:

In the previous articles we have seen that overall index performance and the individual stocks’ performance are unrelated. Even as the indices are scaling to new highs, we find some stocks breaking supports and making new lows. Whatever be the index movement, some stocks will continue to be bullish for short term and medium term. Let us analyze few of these stocks and study the technical scenario as on 06.06.07.

Ind-Swift Laboratories Limited:

This was the so called ‘darling’ stock of the year 2004. Between September and December 2004 the stock appreciated more than 5 times, from 52 to 272. What happened after that of course, is history. It is all the way down to 51 and trying to climb up again.

Why would a person be interested in a stock like this?

Every time a stock goes up or down, the market players are different, crowd psychology is different, investor sentiment is different. A stock that performed so well few years ago may not necessarily perform again. There are a few exceptions too.

This stock has recorded 3 lows so far: 51.10 in June 2006, 51 in November 2006 and 51.15 in March 2007. 55.40 was the previous high before the huge uptrend in September – December 2004. So technically, we can think of a triple bottom at around 51. The short term trend for the stock is bullish and it has closed at 61.90, just 1.50 short of its previous high in the current trend which is 63.40. Once this level is breached on a closing basis, we can think of the next target at 85.20. A close above this would take this stock to 126.70. The strong resistance of course exists at 181, which will be difficult to penetrate.

Having said that, let us think of the other scenario: If the stock fails to close above 63.40, then what will happen?

  1. If 51 level is not breached and stock bounces back after hitting that level, we can expect some more sideways movement.
  2. If 51 level is breached on a closing basis we can expect more down trend.

However, one gets a feeling that 51 is a very strong support level and is unlikely to be breached. No assurances can be given though.

Omax Autos Limited:

The stock had fallen from a high of 171.60 to a low of 58 in June 2006. As displayed above, “inverse head and shoulder pattern” has been formed in the weekly charts which is a bullish sign. Strong support exists at around 82 and once a stock closes above 94.70 which is short term resistance, we can expect it to reach 133 level.

As on today, stock has closed at 93.95. Interestingly, yesterday it formed a “hammer” and today an “inverted hammer”. There is an upward gap of Re.0.50 in the daily chart and this indicates strong demand for the stock.

At least 3 leading indicators, Wilder’s DMI, Stochastics and On balance volume support the bullishness and current trend in both daily and weekly charts.

This is yet another stock which did not “participate” in the ongoing “rally”

Indiabulls Real Estate Limited:

With all kinds of talks going in town about whether real estate prices will top out or bottom out, this one is relatively a new issue. Though bullishness is still intact, one would like to watch for a close above 420. Indiabulls Securities Limited’s IPO, which got listed for Rs.16 in 2004, was a huge success with the scrip closing at 568.80 on 04.05.07. It is surely a stock to watch.