Tuesday, August 7, 2007

5 India stocks to avoid (short term perspective)

In this article let us discuss some stocks which look technically bearish for short term.

Accel Frontline Limited:

Accel Frontline is a Chennai based IT infrastructure services company with presence all over India. It has subsidiaries in US, Singapore and UAE. The company offers IT infrastructure solutions, infrastructure management, software solutions, business process outsourcing, global software services etc. It declared a net profit of Rs.11.95 crores for the financial year 2006 – 07.

It hasn’t been an investors’ choice since February this year. The IPO issue price was 75. After its listing in October 2006 it touched a high of 120.65 on February 6. On March 28 it broke its previous support at 57.50 and closed below it. The stock touched a high of 74 on its bounce back. For the last 4 days it has continuously closed below 53, another critical support. The stock is bearish for both short term and medium term.

Eveready Industries India Limited:

Eveready is the third largest manufacturer of carbon zinc batteries (more than 1 billion pieces every year) in the world. It manufactures rechargeable batteries too. Eveready has entered into packet tea business as well as mosquito repellant coil industry recently. It declared a net loss of Rs.13.43 crores for the last financial year.

This stock has been bearish in daily, weekly as well as monthly charts. It registered a high of 143 in September 2005. Since then, it has been on a downtrend in long term (monthly) charts. Except for the occasional technical rally, it is terribly bearish. On August 1 it broke its short term support at 48.05 and closed below it. It has continued to so for the last 3 days. Apparently, no buying support is available for the stock at the moment in the market.

Gateway Distriparks Limited:

Gateway Distriparks Limited is a world class, state of the art logistics facilitator in India. The company operates container freight stations at Navi Mumbai, Chennai, Vishakapatnam and Inland Container Depot at Garhi Harsaru. In 2005 it received approval from Indian Railways for running bulk trains railway siding. It declared a net profit of Rs.77.67 crores during last financial year.

Let us analyze the daily chart of this stock now.

Watch the huge downward gap on August 2. The stock has broken the short term support at 137.50 yesterday and closed below it. In a downtrend, the downward gap has more significance. We can expect further fall in this stock, as it is bearish in weekly charts too.

Royal Orchid Hotels Limited:

Royal Orchid Hotels Limited runs luxury and business boutique hotels at Bangalore, Mysore, Pune and Jaipur. There are currently nine operating hotels. The group plans to expand nationwide by 2010 and more hotels have been planned at Mumbai, Delhi, NOIDA, Shimla and Hyderabad. It declared a net profit of Rs.35.26 crores for the financial year 2006 – 07.

As we can see from the above chart, the stock has broken its two supports at 178.60 and 173.65. It is bearish in weekly charts too, forming a “three outside down” candlestick pattern last week. Technical rallies, if any, should be used only to exit this stock.

Uttam Sugar Mills Limited:

The company’s manufacturing facility is located at Lbberheri village, Uttaranchal. The sugar plant capacity at this location is 6250 tonne crushed per day along with 16 MW co-generation power plant. Another facility is available (3500 TCD and 10 MW co-generation) at Barkatpur. The company has declared losses at Rs.15.9 crores and Rs.15.2 crores for the quarters ended March and June 2007 respectively.

The IPO issue price for the stock was Rs.340. It got listed on April 10, 2006. After touching a high of 494.40 in May 2006, it has collapsed to 87.30 (almost 82% loss!!). But the story is not yet over, though.

The daily chart of Uttam Sugar is shown above. A “descending triangle” breakout with a triangle height of 50.70 has been formed. This height, when deducted from the triangle base of 96, gives a technical target of 45.30. The stock is extremely bearish and it was recommended by many financial newspapers and magazines as “avoid” during IPO stage itself.