The India Street Analyst Upgrades and Downgrades – Review

The India Street previously reviewed some stocks in India Street Analyst - India Stock Upgrades and Downgrades – Part 1 and India Street Stock Analyst upgrades and downgrades – Part 2. Let us analyze the current technical picture of these stocks and re-assess our ratings.

Following ratings are used to indicate the effectiveness of the trend:

««««« Strong

«««« Good

««« Medium

«« Moderate

« Mild

The effectiveness of the trend is arrived at after taking into account the retracements, momentum indicators, volume indicators and direction indicators.

The ratings are for medium term and these are based on weekly charts.

A red « means mildly bearish; green «« means moderately bullish.

Development Credit Bank:

We gave a bullish ««««« rating for this stock previously. At that time the stock was on the 4^th wave and as anticipated, it bounced back after hitting a low of 88.50. During the 5^th wave, it managed to break the previous high at 120.55 but did not close above it. This move was not supported by the volumes either,

as price increase was accompanied by declining volume (see chart). We can see a “doji” body with long upper shadow, meaning selling pressure at higher levels. It was followed by a red candle (bearish engulfing pattern) and another red candle as confirmation (three outside down pattern). Now the bearishness is confirmed and we modify our ratings to bearish ««. Moreover it has formed a “double top” in daily charts and a close below 88.50 would mean further bearishness in medium term.

Sical Logistics Limited:

We gave a bullish «««« rating last time. But the stock did not break its resistance at 301.35 on a weekly closing basis and a downtrend has started. It has just broken its 38.2% retracement at 242.75 and closed below it. This is perfectly alright, since a decline after a long first wave would be healthy one.

As such, this correction will be a good opportunity to enter the stock. When the uptrend resumes, the stock should be able to break its resistance and move upward. Though the stock is on a downtrend (watch the declining volumes) it is bullish for the medium term and we re-rate the stock as «««.

PSL Limited:

This stock has been chosen as a “long term pick” in my previous article 5 Reasons to be Bullish in the Long Run. It has declined slightly (about 13.5%) on weekly charts, however this correction is good for the long term outlook for the stock. We still maintain our bullish ««« rating on this stock.

Cadila Healthcare Limited:

We gave a bullish «««« rating for this stock. It declined from 387 to 340 in July but managed to bounce back after hitting the support trendline. A “bullish three inside up” pattern has been formed over the last 3 weeks, which confirms further uptrend. There is no change in rating for the stock as of now.

FDC Limited:

The stock failed to break its horizontal resistance at 34.50 on a close basis, though it achieved a high of 36.80 during the last week of June.

It has continuously declined since then; it has even managed to break its support at 29. So we revise the rating for the stock from ««« to «««.

Global Vectra Helicorp Limited:

A bearish three outside down pattern occurred in the stock after a strong consolidation pattern as shown below.

Though the support level is yet to be breached, it is likely to be tested. Since it has closed below 61.8% retracement and no bounce back occurred, we revise our rating from «««« to «.

S.Kumars Nationwide Limited:

It has formed an “ascending triangle breakout” as shown below.

The technical target of 113.20 has already been achieved by the stock when it made a high of 115.90 during first week of July. It has not broken the support trendline yet. Apparently, stock is in 4^th wave and a bullish engulfing pattern has been formed last week. If this could be confirmed by a positive close and green candle this week, stock is likely to resume its 5^th wave, the technical target for which will be around 132. We revise our rating from ««« to ««««.

5 Reasons to be Bullish in the Long Run

In this article let us discuss some stocks which are interesting from a long term perspective. As we have seen my previous articles, “long term” means a holding time of at least a year or more. The stocks are chosen from either A group or B1 group of Bombay Stock Exchange (BSE). The analysis is based on monthly charts.

Hitachi Home and Life Solutions (India) Limited:

Hitachi Home & Life Solutions (India) Limited is a subsidiary of Hitachi Home & Life Solutions Inc., Japan. 69.90% stake is being held by the promotors. The Ahmedabad based company is a leading manufacturer of air conditioners, refrigerators and fully automatic washing machines. The company’s net profit was Rs.19.33 crores for the financial year 2006 – 07.

The stock made a high of 124.85 in August 2005. It has been in some zig zag pattern since then. After 24 months of consolidation it has broken out with reasonably good volumes (in fact more volumes than at its previous peak). In January 2007 the stock actually broke its previous high; but didn’t close above it and volumes were not encouraging either. The long term targets for the stock is 208 and 260. Good support exists at 100.

Nagarjuna Fertilizers and Chemicals Limited:

The company’s natural gas based urea plant with a capacity of 1.2 million tonnes per year is located at Kakinada, a port town in the state of Andhra Pradesh on east coast of India. Natural gas is drawn from Krishna – Godavari basin. The company plans to expand the capacity to 1.7 million tonnes soon. Product range includes urea, anhydrous ammonia, diammonium phosphate (DAP), Muriate of Potash, hydrates of zinc sulphate and speciality fertilizers. It declared a net profit of Rs.31.71 crores in 2006 – 07, more than 50% down from its previous year’s figure of Rs.66.86 crores.

This stock witnessed a bullish breakout in May 2007 almost after two and a half years. The volume was a record high as can be seen in the chart. When it broke the previous resistance in November 2004 the volumes were pretty good. This is another factor which makes the stock more interesting. Though there had been some hiccups in between, it has finally broken out. The stock has a good support around 18.25. The long term target works out to 39.

PSL Limited:

PSL Limited has expertise in the design, manufacture, supply, erection and commissioning of plants, machinery and equipments catering to the pipeline industry. It is one of the largest pipe manufacturers in India with 10 pipe mills at strategically coast based locations in Chennai, Kandla and Daman with an annual capacity exceeding 1 million metric tonnes of size varying from 16" dia to 120" diameter with wall thickness from 5mm to 25mm. The company’s net profit stood at Rs.62.16 crores for the financial year 2006 – 07.

The stock has appreciated from a low of 29.70 in October 2002 to a high of 312 in January 2006. A correction, equivalent to 38.2% retracement occurred. Though it managed to break 50% retracement, never closed below it. This month it has witnessed a powerful bullish breakout with decent volumes. The long term target for the stock works out to 474.

PTC India Limited:

In India, each state has its own demand – supply scenario for power which sometimes could be seasonal. While one state is on a deficit some other state may generate excess power. PTC India Limited (formerly known as Power Trading Corporation of India Limited), was set up to act as an entity which could undertake trading of power to achieve economic efficiency and security of supply. PTC acts as an intermediate by buying power from the generation projects and sell to multiple power utilities and other buyers. It declared a net profit of Rs.35.09 crores for the financial year 2006 – 07.

The chart displayed above shows the valiant attempt to break resistance on 4 occasions before a breakout occurred this month. These are marked 1,2,3 and 4 on the chart. It can be noted that even though the stock managed to close above resistance levels, it could not move up further due to lack of volumes. There is no hard and fast rule about this, but surpassing at least 75% of the previous peak’s highest volume gives the stock better chance of sustaining the breakout. Now that this has happened, we can expect targets of 122 and 155.

Union Bank of India:

Union Bank of India has the proud distinction of being flagged off by Father of the Nation, Mahatma Gandhi. It is a public sector unit with 55.43% share capital held by the Government of India. The bank came out with its Initial Public Offer (IPO) in August, 2002 and Follow on Public Offer in February 2006. The bank’s net profit was Rs.84.54 crores for the financial year 2006 – 07.

The stock has become bullish on long term charts this month, by breaking its previous high at 143 with volumes. It has taken almost 2 years for the consolidation pattern to get over. The stock had formed a “double top” as can be seen in the chart. Now that it is broken, we can expect targets of 243 and 324 in future. In my previous article “5 Great Long Term India Stock Buys” published last month, we discussed about DENABANK and “triple top” formation eventually getting broken. Chart patterns and candlestick patterns form vital part of technical analysis and it is essential to examine these first, before analyzing other criteria.

India Street Analyst – India Stock Upgrades and Downgrades – Part 1

In this article let us review some stocks which are technically bullish, bearish or sideways. We will keep updating the ratings on a regular basis.

Following ratings are used to indicate the effectiveness of the trend:

««««« Strong

«««« Good

««« Medium

«« Moderate

« Weak

The effectiveness of the trend is arrived at after taking into account the retracements, momentum indicators, volume indicators and direction indicators.

The ratings are for medium term and these are based on weekly charts.

Development Credit Bank (DCB):

The stock retraced from a low of 35 to a high of 86.40 during wave 1 as indicated in the chart. There was a mild sideways movement in between; it may not be called a wave since the stock never broke the 38.2% retracement and closed below it. 38.2% and 61.8% are the most important fibonacci retracements. That way, we will consider the entire movement from 35 to 86.40 as a single wave. This gives a retracement of 247%. The second wave’s low of 53 falls below 61.8% retracement, but never really closed below 50%. The third wave made a high of 120.55 or about 227% retracement. Currently the 4^th wave is in progress. As can be seen from the chart, there is consistent decline in price and volume. This indicates bullishness is intact. Stock is expected to test its previous high of 86.40. 61.8% retracement works out to 78.90 and the stock may bounce back between these two levels. Final target, going by the previous waves retracement history, may be around 160 (assuming the stock makes an exact low of 78.90 during the 4^th wave). Actual targets can be estimated after the stock bounces back. This stock is an ideal example of wave theory.

Rating for this stock: Bullish «««««

SICAL LOGISTICS LIMITED:

Yet another stock that has lost 50% from its previous high. From 580 during May 2006 it fell to a low of 144.05 in March 2007. The stock has broken its resistance at 256.15. The next resistance level is around 301.

Watch the triangle breakout in the chart. It is a highly bullish sign. Though the stock may be in overbought condition due to the nearly 100% retracement in the first wave, it is bullish for the medium term. Any decline in this stock could be only an opportunity to enter. 61.8% retracement works out to 414, which could be the medium term target.

Rating for the stock: Bullish ««««

PSL Limited :

The stock, after making a high of 312 in January 2006 fell to a low of 158 in September 2006. It was in consolidation since then. The strong resistance around 250 was broken recently and it closed above it on a weekly basis. The momentum, direction and volume indicators favour further uptrend. The stock is likely to test its previous high of 312 shortly.

But the lack of volumes during the uptrend is a minor concern. However, if it manages to close above 312 on a weekly basis we can expect even further upward movement.

Rating for the stock: Bullish «««

Stocks that are bearish / sideways:

Stock	Status	Rating
ACC	BEARISH	««««
BOMBAY DYEING	BEARISH	«««
CIPLA	BEARISH	««
CAMBRIDGE	SIDEWAYS	«««««
ENGINEERS INDIA	SIDEWAYS	«««
TAMIL NADU PETRO	SIDEWAYS	«««