Monday, July 16, 2007

Buy These India Stocks and Hold for 6 Months

In this article we shall review five stocks that look technically good for medium term. The patterns and breakouts discussed are based on weekly charts.

Cosmo Films Limited:

Cosmo Films is the largest exporter of bi axially oriented polypropylene films in India. It has a manufacturing capacity of 60,000 Tonnes of BOPP and 8,000 Tonnes of thermal lamination film. The films are classifed as transparent (coatings and tapes, bakery products packaging, cigarettes wrap etc.) , white and pearlized (soft drink bottles), pigmented (food packaging), metallizable (biscuits/food packaging) and speciality films (visiting cards, posters, calenders, brochures etc.). The company has reported a net profit of Rs.24.82 crores in 2006 – 07 at an EPS of 12.77.

In my earlier article, Chart Patterns and market’s reaction we discussed about inverse head and shoulder pattern. We find the same here in weekly charts. The “left shoulder”, the “head” and the “right shoulder” can be seen clearly in the above chart. On breakout above the neckline, the volumes are increasing. It is a confirmation of the pattern formation. The next resistances are at 114 and 139.

HEG Limited:

HEG is Asia's leading graphite electrodes manufacturer and exporter. The company has four dvisions: graphite electrode manufacturing, captive power plant, steel billets manufactring and carbon speciality. HEG won the country's top export award (CAPEXCIL) for 17 consecutive years. It has the largest integrated graphite electrodes plant in south east asia / middle east and second largest in the world. The company’s net profit for 2006 – 07 turned out to be Rs.73.84 crores at an EPS of 18.32.

A cup and handle breakout pattern has been observed in the weekly charts of HEG. It can be seen that the cup formation has taken about 6.5 months and the handle formation about 7 months. Pattern is confirmed by resistance breakout with volumes this week. The target for the stock can be measured by subtracting the low of the cup from its right peak, which works out to be 306.

Rohit Ferro Tech Limited:

The Company manufactures High Carbon Ferro Chrome (HCFeCr), Ferro Manganese (FeMn) and Silico Manganese (SiMn) through Submerged Arc Furnace (SAF) route, with the total combined capacity of more than 175,000 Tonnes per year. It is a part of the Impex group which manufactures various ferro alloys. The company was accredited ISO 9001:2000 in August 2004. It also received Two Star Export House Status. The net profit for the financial year 2006 – 07 stood at Rs.19.22 crores at an EPS of 6.61.

This stock is yet another example of losing more than 50% in the bull market. It fell from 61.70 in May 2006 to a low of 24 in March 2007. A small uptrend had started afterwards. But the resistance trendline could not be broken (see the negatively sloped line). Now it has broken the horizontal resistance line as well as the resistance trendline. The next resistances for the stock are 44.60 and 58.95.

Kirloskar Oil Engines Limited:

Kirloskar Oil Engines is a well known Pune based engineering company. The Kirloskar group is worth nearly US $ 600 million. The Kirloskar Group makes equipment, machinery and high precision engineering products for the transport sector, including ship building, railways, roads and cargo. They also have a major presence in auto components, process industries, rubber and plastics, textiles and also consumer goods industries. Kirloskar Oil Engines’ product range includes diesel engines, irrigation pumpsets, diesel generating sets, engine bearings, engine valves and grey iron castings.

The company’s net profit for the year 2006 – 07 was Rs.178.41 crores at an EPS of 16.07.

One more nearly “cup and handle” breakout. Nearly, because the cup is almost a “V” whereas it needs to be very much like a “cup”. Still, it had taken about 7 months each to form for the cup and handle. It is a bullish continuation pattern. The stock had broken its resistance this week. Target for the stock works out to be 456.

Zee Entertainment Enterprises Limited:

India’s premier Hindi entertainment network Zee has more than 225 million viewers across the globe. In the last 10 years it has won numerous awards both in India and abroad. It has a audience in 80 countries worldwide. The channels include Zee TV, Zee Cinema, Zee Music, Zee CafĂ© (English), Zee Studio and Zee Trends. Its cable TV business is now under a separate company known as Wire and Wireless India Limited, a listed company at both BSE and NSE.

Zee was awarded "BSE Award for Maximization of Shareholders Wealth - 2000" . The net profit for the company during 2006 – 07 was reported to be Rs.167.79 crores at an EPS of 3.96.

Watch the “ascending triangle breakout” in the chart. It is again a bullish continuation pattern. We have discussed about this pattern in my first weekly review of Indian stock market. The triangle height is 111.4, which when added to the previous high of 319.40 gives a target of 430.80.