Medium term investors - Watch out these 5 stocks!

Over the last 3 months several stocks have lost badly from their previous highs. Some of them have shed more than 70%. In the current market situation, let us now focus our attention on 5 stocks that are likely to move upwards for medium term.

Broadcast Initiatives:

This stock was truly for the bears. From a listing high of 140 it was thrashed to a low of 37 in early November. It got doubled from this level and made a high of 74 in first week of December last year. Last week the stock made a low of 21.60.

The above chart is drawn on a semi logarithmic scale on the Y axis. It can be observed that the stock has made a new low. A long black candle (this is the computer age so displayed as red) was followed by a hammer and this was followed by a white candle (green). It is to be noted here that as the stock broke the support and closed below, prices fell and volumes had increased. The stock has ultimately found support at 21.60. The support level of 37 will now be the resistance for the stock. Once it breaks this, a technical target of 54.40 can be looked at.

Cummins India:

The stock had fallen from 472.80 in September 2007 to 255 in February 2008. It was between this period the Nifty climbed from 4500 to 6300. If we draw a support trendline between the previous low points, the stock had just managed to penetrate this line but never closed below it. A bullish three inside up candlestick pattern has been formed this week. Note that the entire range of green candle is within the range of red candle. The medium term target works out to 390.

Inox Leisure:

This stock is extremely oversold in the weekly chart. It was all the way up during December but has been beaten down terribly. Last week's low of 80.80 had broken the long term support at 86.15; however the stock did not close below it. In this case too, a bullish three inside up pattern has been formed. The shadows of green candle extend beyond the low of red candle as in the case of Broadcast Initatives. Technically 107 is the first hurdle for the stock. Once it crosses this level on a weekly close basis one might expect a target of 142.

ITD Cementation India:

Like Broadcast Initiatives, this stock has also found a new low and a bullish three inside up candlestick pattern has been formed after a typical sell off. It trades at 367 now but exactly a year ago it made a high of 1569. This is a good example of how investor wealth could be eroded very quickly in the stock market. Currently 392.65 will act as a strong resistance for the stock. A weekly close above this is required for the stock to target 466 and 522. This stock is also highly oversold in the medium term charts.

Mangalore Refinery & Petrochemicals:

The stock had a dream run last year as it went up from 32 to 148 between April and November. But in the last 3 months it has fallen heavily and it is consolidating now. Both long term and medium term charts have been shown above. The stock broke its long term resistance at 69.15 during September 2007 and it nearly doubled in the next three months. However, it lost almost 43% during January 2007 alone. The monthly chart indicates that the stock never closed below 69.15, indicating strong support. In the weekly chart, a bullish three outside up pattern has been formed, suggesting a possible medium term reversal. Technical targets for the stock are 94 and 115.

5 Reasons to Remain Bullish on India Stocks in the Short Term

We have been discussing about technically bullish Indian stocks for the last one month. In this article we shall analyze 5 stocks that are interesting from a short term perspective. These stocks are either from ‘A’ group or ‘B1’ group of Bombay Stock Exchange (BSE).

Mangalore Refinery and Petrochemicals Limited (MRPL):

MRPL was set up in 1988 with a crude processing capacity of 3 million metric tonnes per year by HPCL (Hindustan Petroleum Corporation) and Aditya V Birla group. ONGC (Oil and Natural Gas Corporation) acquired entire shareholding of A V Birla group in 2003, making it a majority held subsidiary. Currently the refinery’s capacity stands at 9.69 million metric tonnes per year. MRPL implemented Quality Management System (QMS) as per ISO 9000:1994 standards from December 1999. In January 2003, MRPL upgraded its QMS to ISO 9001:2000 standards and was accredited on March 13, 2003 by TUV Rheinland. It has declared a net profit of Rs.525 crores for the financial year 2006 – 07.

Both weekly and daily charts of MRPL are displayed below. In weekly chart, an “inverse head and shoulder” pattern has been formed. We have seen in my previous article “Chart patterns and market’s reaction” that this pattern is a bullish sign. Watch the low on the ‘inverse head’ nearly going down to test the previous low. The neckline resistance has been broken comfortably.

In the daily chart, we can see the waves clearly. The first wave retraced from a low of 32.50 to a high of 45.70. Some decline and consolidation has taken place in the last two months; on July 23 it had broken its resistance with very good volumes. The next resistance exists at 48.50, which is also the 50% retracement level considering a previous high of 64.40 and recent low of 32.50.

Close above 48.50 will take the stock to 52.25 and 56.90.

Neyveli Lignite Corporation of India Limited:

Neyveli Lignite Corporation (NLC) is located at Neyveli in the state of Tamil Nadu. It has been involved in exploitation of lignite deposits and thermal power generation for over 40 years. NLC offers consultancy services to other organizations in thermal power generation. It has two lignite mines with a capacity of 10.5 million metric tonnes per annum each and another with a capacity of 3 million metric tonnes per annum. The total installed power generation capacity is 2490 MW. It has also proposed to install power plants in Tuticorin (Tamil Nadu), Gujarat, Rajasthan and Orissa.

The company’s net profit for the financial year 2006 – 07 was Rs.567 crores.

As in the case of MRPL, this stock too, has formed an “inverse head and shoulder” pattern in weekly chart. It has also broken its resistance in weekly chart.The breakout volumes in daily chart have been good in both MRPL and NLC. In fact, it has managed to close above 80.50 which is 61.8% retracement considering a low of 48.75.

The next target for the stock is its previous high i.e. 100.20.

Rashtriya Chemicals and Fertilizers Limited (RCF):

RCF manufactures various grades of urea, bio fertilizer, liquid micronutrients, methanol, sodium nitrate, sodium nitrite, ammonium bicarbonate, methylamines, dimethyl formamide, dimethylacetamide etc. Over the last 3 years, its net profits have been more or less consistent i.e. Rs.141, 149 and 148 crores.

The daily chart of RCF is displayed above. The stock, after making a high of 49.85 on February 9, 2007, was on a downtrend for about a month. Nearly after 4.5 months it has broken the previous high with very good volumes. The previous high should act as a support for the stock. It is also bullish on weekly charts. The next targets for RCF are 56.50 and 62.50.

Tata Sponge Iron Limited:

The company was initially set up in 1986 as a joint venture undertaking by Tata Steel and the Industrial Promotion and Investment Corporation of Orissa (IPICOL). In 1991 Tata Steel acquired the entire stake of IPICOL. Tata Sponge manufactures sponge iron with an installed capacity of 390,000 metric tonnes per year. Company’s net profits for the last two years have been steady at around Rs.22 crores.

In the daily chart of TATASPONGE, the classic “cup and handle” breakout, a bullish continuation pattern can be observed. It has taken about 6 months to form this pattern. The cup’s left peak of 132 was broken on Monday with good volumes. In weekly chart, the stock had formed a “double bottom” between January and April 2007.

The target after the cup and handle breakout works out to 168.

Varun Shipping Company Limited:

Varun Shipping is a private hydrocarbon cargo carrier in India with a fleet of 12 LPG tankers, 3 crude oil vessels, 3 offshore supply vessels and 1 product vessel. These vessels are either placed directly with the end users or in the pools wherein the managers of the pool arrange for chartering of these vessels. The company had declared a net profit of Rs.141 crore for the year 2006 – 07.

The stock is bullish in both daily and weekly charts. It has been consolidating over the last 2 months and on July 23 it had broken out with reasonably good volumes. Minor resistance exists at 71, after which the targets are 75 and 83.