Let us now analyze the following stocks from a long term perspective.
Note: I received a few queries about using technical indicators on charts. The indicators (leading as well as lagging) can be useful in confirming a particular pattern. The primary focus is on price action, chart patterns, candlestick patterns, supports, resistances etc. Indicators alone cannot be used for investing or trading since these are derived using various formulae from open, high, low, close and volume.
Chambal Fertilizers and Chemicals Limited:
This company is a part of K.K. Birla group and was promoted in 1985 by Zuari Industries Limited. Chambal operates two nitrogenous fertilizer plants and has the largest private sector fertilizer complex in India. The combined capacity of the two plants is around 1.73 million tonnes of urea per year. It caters to the northern and western regions of India and supplies urea to nine states. The company has also entered into food processing, textiles and software. Its main product urea is marked under the brand name “Uttam Veer”.
The company’s net profit for the financial year 2006 – 07 was Rs.151 crores while for the previous year it was Rs.203 crores.
In the monthly chart shown above, it can be seen that the stock took nearly 11 years to break its previous high at 39.50. But the breakout was not accompanied with good volumes. The stock had declined since February 2006 and did not break its support trendline. This month it has closed above its short term resistance at 46.80 with record volumes. The stock has already retraced from a low of 27 in July 2006 to a high of 54 this month. The long term target for the stock will be 71 and 91.
Gitanjali Gems Limited:
Gitanjali Gems Limited is an integrated diamond and jewellery manufacturing company. Its products are marketed under the brand names ‘Asmi’ and ‘Gili’. The product list includes rings, pendants, ear rings, two stones, colour stones etc. Computer aided design and manufacturing are used in the production of jewellery. Its manufacturing facility is located at Andheri, Mumbai.
The company became public last year when it came out with an IPO at a price of Rs.195.
The company declared a net profit of Rs.82 crores for the financial year 2006 – 07.
The response to the IPO in the secondary market was not an overwhelming one, as it lost about Rs.24 during March 2006. It did however manage to touch a high of 267 in May. During the heavy fall in the index between May and June last year, this stock too was not spared – it fell to a low of 108.20. On the above chart, watch the waves marked 1, 2 and 3. Apparently wave 3 is in progress. During the corrective wave 2 it never really closed below 50% retracement at 186.15, which is a sign of healthy bull market. This month it has broken its resistance at 267 and closed above it. The longer term target for the stock, when calculated from a low of 177.10 works out to 464.
Honda Siel Power Products Limited:
Honda Siel Power Products Limited (formerly Shriram Honda Power Equipment Limited) specializes in manufacture of 4 stroke portable generators, water pumps, engines & lawnmowers. It is a joint venture between Honda Motor Co. Japan and Siel Ltd., with 67% equity stake of Honda Motor Co. Japan.
The company declared a net profit of Rs.17.38 crores for the financial year 2006 – 07.
In the monthly chart shown above, the stock had a “Triangle breakout” last month with huge volumes. The triangle height works out to 108.90. This when added to the triangle top of 210.95 gives a target of 319.85. Minor resistance at 249.40 has been broken but the stock has not closed above it. The next resistance for the stock will be its previous high of 348 made during September 1997 (Readers might now realize how much time it may take for a stock to come back to a particular level). Once 348 is breached, the stock may touch 408.
Malu Paper Mills Limited:
Malu Paper Mills Limited is promoted by the “The Malu Family” and all its directors are from the family; They are first generation entrepreneurs. This group has business interests in coal and lignite trading , manufacturing and trading of MS electrodes, manganese processing and exports, MS Ingots and castings.
The group has set up two paper manufacturing units at Nagpur. The units have a capacity of 8,250 tonnes per year of kraft paper and 19,800 tonnes per year of newsprint. The company declared a net profit of Rs.3.56 crores for the financial year 2006 – 07.
The stock, with an IPO price of 30, was not initially well received in the secondary market. But it still managed to reach a high of 44.15 during December 2006. In the above chart, watch the price and volume decline simultaneously. This is an indication of bullishness. Currently wave 3 is in progress. Last month the stock had broken its resistance at 44.15 and closed above it. A bullish “Three outside up” candlestick pattern can be seen in the chart. It is particularly significant in medium and long term charts. The stock can be expected to reach a target of 75 in the long term.
MSP Steel and Power Limited:
The company manufactures sponge iron (200,000 MT/year), mild steel billets/ingots (100,000 MT/year), TMT bars (90,000 MT/year,thermomechanically treated), ferro alloy products, industrial and medical oxygen. A power plant of 24 MW capacity is located at Raigarh. The group has manufacturing facilities in the states of West Bengal, Orissa, Jharkhand, Andhra Pradesh, Chhattisgarh and Maharashtra. The company declared a net profit of Rs.7.1 crores for the quarter ended June 2007.
The stock was issued at an price of Rs.10 during July 2005. It touched a low of 8 during June 2006. Between May and June 2006 when many stocks lost more than 30% to 40% this stock lost ony 12%. Last month, it broke its resistance at 21.10 and closed above it. The longer term target for the stock is Rs.40. It is to be noted that correction, if any, in the stock should be used only as opportunity to enter long positions. Support exists at 21.10 which is its previous high as well as 38.2% retracement level.