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.

5 India Stocks You Need to Own in the Short Term

In this article let us review some stocks which are technically bullish for the short term. As I have mentioned in my earlier article these stocks are selected either from A category or B1 category of BSE (Bombay Stock Exchange). This helps in eliminating illiquid stocks, those with listing related issues etc.

Gokaldas Exports Limited:

Technically this stock is looking great for the short term. Yet another incidence of a stock losing more than half its value in this wonderful bull market. It had fallen to a low of 186.65 last month from a high of 407.70 in April 2006. The stock was split into a face value of Rs.5 from Rs.10 during February 2007. The high corresponds to the adjusted value.

Watch the chart below. It is in the third wave and it has broken its short term resistance at 234.

Short term resistance exists for the stock at 280. Medium term resistance is at 332.45. It is a short term trader’s dream stock from a technical point of view.

In weekly charts, it is currently in the first wave. So, after the 5^th wave in daily charts, the stock may either get corrected or consolidate. If the stock is able to move into 3^rd wave in weekly charts, we can view it for a medium term.

Hindustan Construction Company Limited:

In my earlier article we saw about bullish patterns such as double bottom, triple bottom, cup and handle breakout etc. Here is a classical example. This stock, like the previous one, is in third wave, which many people reckon the best to trade. It broke its short term resistance at 110 on 21.06.07. Today it has gained 7.73%. The next resistance is around 127.60 and after that 149 will be the next. Triple bottoms are very highly reliable patterns of bullishness. In 2005, CCL had a similar triple bottom. After breaking its resistance at 213 on 13.06.2005, it went all the way up to close at 529.15 on 13.01.06. This is only an example; there is no guarantee that it will get repeated in this case.

Orbit Corporation Limited:

This is a recently listed stock. If we consider the entire upmove from 110.15 to 264.60 and again a correction to 215.25, a full cycle has been completed in daily charts. The stock has broken its short term resistance. However, today the long upper shadow indicates possible sell off; that can be confirmed by the higher volumes. The stock is currently on first wave. So a decline cannot be ruled out. But it still looks good for the short term.

South Indian Bank Limited:

This has also broken its short term resistance on 20.06.07. A falling window was formed on 02.04.07. Watch the gap between previous day’s low and this day’s high. These gaps, it is often said, are formed only to get closed. After this downward gap formation stock consolidated for a while before breaking out. Once again, the stock has consolidated for about 45 days, eventually before breaking out again. The stock is bullish now in both daily and weekly charts.

Short term targets work out to about 156.

Opto Circuits India Limited:

This stock is bullish in both daily and weekly charts. Watch the huge triangle breakout in daily charts with a triangle height of around 94 rupees. After the breakout the stock went into consolidation. It has once again broken out. Short term target works out to 455. The triangle breakout, again is a very bullish sign.

We will watch out for the stock’s performance.

We shall review the stocks discussed here in our future articles.