Survivors during this month’s stock market cyclone

Investment pundits say that it is easy to identify the winners in a mad bull market but very difficult to pick them during a falling bear market.

On January 18, 21 and 22 Nifty lost 207.90 points (3.52%), 496.50 points (8.70%) and 309.50 points (5.94%) respectively. While some F & O stocks were terribly down more than 30%, there were a few stocks that didn’t lose even 2% on all three days. Let’s now discuss these with a short and medium term perspective.

Gokaldas Exports:

Here is a classic case of wave 3 not able to achieve 1.618 times wave 1. Just after hitting 266, the wave 3 has ended i.e. the resistance at 265 could not be conclusively broken on the weekly chart. By conclusively we mean a higher close and good volumes (usually at least twice the moving average.) It can also be seen that the stock went below the support trendline. Finally, when it broke the resistance at 266, it simply couldn’t rally and fell further. Now the support at 225.70 has already been broken (though not closed below it). Next support is at 212. A close below 186.65 is likely to make the stock bearish. Any rally after that can be used only to exit the stock. The stock lost 0.35%, 0.37% and 0.22% respectively.

Northgate Technologies:

This stock has bounced back from support levels around 405 last week. A “doji” was formed near the 100% retracement level which means that the stock is likely to begin an upmove.

Since January 22, the stock has neither gained nor lost much. However, it has to be remembered that it is currently on the first wave in daily chart (assuming it has already bottomed out) and only the bravest of the crowd might wish to enter at this stage. Most people would like to follow the third wave. On January 22 when there was so much volatility in the market, the stock closed positive with about 150,000 shares traded (almost 6 times the moving average). Let’s see if this is the real bottom. As mentioned earlier, 405 is the last available support and once this is broken, stock is likely to become bearish. The stock lost 0.14% and 0.46% on first two days while it gained 0.56% on the third day.

Sterling Biotech:

Apparently, this stock is making lower highs and lower lows in the weekly chart. The horizontal support at 129.10 is still intact. The volumes are subdued and as in the case of Northgate, this is the first wave in daily charts. This stock too, doesn’t qualify for a long position as on today. It lost 1.54%, 1.37%, 1.52% respectively.