Sunday, June 10, 2007

Technical review of select India stocks – Part 2


In this article let us discuss some stocks which have either been consolidating over a few months or have fallen considerably from their all time highs. This will enable an investor to identify potential opportunities even in an uncertain or falling market.

In the previous review I had mentioned that the following stocks need to close above their resistance levels:

Ind Swift Laboratories Limited: 63.40 (Current: 59.20)

Omax Autos Limited: 94.70 (Current: 92.05)

Indiabulls Real Estate: 420 (Current: 376.35)

As on 08.06.07 the stocks have not broken their short term resistance. However, we will keep tracking them in every review.

Jindal Photo Limited:

The stock had fallen from a high of 418.95 in May 2005 to a low of 70 in June 2006. It has been consolidating since then. A year of consolidation is very interesting. This stock is currently bullish in both daily and weekly charts.

One can see the consolidation between 70 and 120 levels in weekly chart in the graphic displayed above. The support at 70 still remains intact even though it came close to be broken around 72 in early March 2007. The stock had strongly bounched back from that level. The only requirment now, is that it has to close above 122.30 on a weekly basis. Current market price is 109.60. Though a bearish harami pattern has been formed during the last two weeks, we will wait for the price action next week to confirm the trend. Harami (English: pregnant) is usually a “confusing” pattern unless confirmed with another parameter. If it manages to break resistance we can expect targets of around 159 and 187.

Pochiraju Industries Limited:

The stock got listed on 09.02.07 for an issue price of 30. After hitting a high of 63.70 on the same day it had fallen to a low of 20.25 on 26.03.07. The resistance at 27.20 was broken with a huge “upward gap” on 23.05.07.

“Upward Gap” or positive difference between yesterday’s high price and today’s low price is an indication of strong demand for the stock. But in many cases, the so called “gap” gets filled quickly and we need not worry much about this. Watch the consistent decline from 23.05.07 after the “gap” day. This shows that the crowd is not interested at all in the stock now; But the technical analysis theory suggests that this type of formation is usually highly bullish. Why would a stock should jump suddenly from 22.35 to 30.70 in just two sessions and no one is interested after that? If the price volume action is not uniform we can suggest that it is probably something else. The stock appears to be certainly very bullish and 50% retracement from its low works out to a target of 42.15 or about Rs.18 from the current levels.

Punjab Tractors Limited:

The stock managed to climb up from a low of 227.90 on 18.01.07 to a high of 363.70 on 09.02.07. It was on a corrective decline for about 3 months. It has become bullish once again. Usually, 50% retracement will be a good support in a bull market and it will be a good resistance in a bear market. One can see it from the above chart. Once the stock goes below 50% retracement it manages to bounce back again and closes above it. 4 months of consolidation is extremely good and given the bullishness of the stock, we can expect it to test its all time high of 363.70 shortly. Further upmove may be possible if it manages to close above it on a weekly basis.


All the three stocks mentioned above have been consolidating over a period of time now. In stock markets, big movments usually take some time. Stock may be consolidating for a long while eventually before a breakout occurs either way. But as of now, from the data available, it could be only on the bullish side.