Disclosure
Investors buy stocks anticipating appreciation in prices. Due to market conditions, three possibilities exist: prices increase, decrease or do not change much. We have discussed about bullish and bearish stocks in previous articles. In this article we will discuss about some stocks which have neither gained nor lost substantially (less than 1%) in the last 1 year or 249 trading sessions. As usual, the discussion is restricted to either A group or B1 group stocks of BSE (Bombay Stock Exchange).
D-Link India Limited:
D-Link is a leading IT hardware company in India. The product range includes switches, routers, firewalls, security gateways, ethernet cards, ADSL modems, wireless antennae, VoIP equipment etc. With a net profit of Rs.21.92 crores in 2006 – 07, it hasn’t performed badly when hardware prices have been falling.
http://groups.google.com/group/theindiastreet/web/D-LINK.jpg
The weekly chart shown above indicates that the medium term support was broken in February 2007. However, the last support at 62 still remains intact. Though a higher high and higher low was formed, the resistance trendline hasn’t been broken yet. So the market is indecisive for the medium term about this stock. Only a close above 89.15 on weekly basis will trigger the bullish trend for the medium term. On the contrary, a close below 69.20 with volumes on weekly chart will result in a descending triangle breakout, which will mean further bearishness for the stock.
The daily chart indicates that stock became bullish for short term in April this year. But the buy signals generated have been short lived. Watch the whipsaws for the last two months. These can occur at market tops as well as at bottoms. Considering that the stock had made a high of 235.90 in February 2004 and low of 62 in June last year, we can conclude that the stock is in the process of bottoming out.
Harrisons Malayalam Limited:
Harrisons Malayalam Limited is the largest producer of rubber in India. It is also the largest cultivator of tea in southern India. The other agricultural products include areca nut, banana, cardamom, cocoa, coffee, coconut, pepper,vanilla, organic tea and spices (these are produced in smaller quantities). The company declared a net profit of Rs.14.11 crores for the last financial year.
The weekly chart clearly tells us that the low of 63.30 formed during July 2006 has not been broken yet. It is in strong consolidation for the medium term. Watch the resistance trendline getting broken and stock closing above it in the chart shown below. The attempt to break the support was successfully negated in March and June earlier this year.
As in the case of D-Link, there are plenty of whipsaws occurring at the possible market bottom in the daily chart. It is interesting to note that this stock had fallen from its all time high of 193.75 in March 2006 to a low of 63.30 in July 2006. In other words, it lost nearly 67% in 4 months.
A weekly close above 76 will initiate bullishness in the medium term for this stock.
http://groups.google.com/group/theindiastreet/web/HARRMALAYA.jpg
NRB Bearings Limited:
NRB Bearings Limited manufactures variety of bearings like needle roller bearings, cylindrical roller bearings, spherical roller bearings, wide inner ring bearings, tapered roller bearings and ball bearings. It declared a net profit of Rs.39.76 crores in the financial year 2006 – 07.
TUV SUD Management Service (Gmbh) have awarded ISO 9001:2000 corporate certification to the company.
http://groups.google.com/group/theindiastreet/web/NRBBEARING.JPG
We can see the “descending triangle breakout”, a bearish continuation pattern in the weekly chart. The first support at 88.56 was broken seven times, with low going below it. But the stock had managed to close above the support. During June this year, it has managed to pierce the support and close below it for two weeks in a row. The minor upswing that followed was simply a technical rally. As the support was broken on close basis for the second time, the volumes also went up. The bearish target after this triangle break out is 60.30. It can be seen that the second support at 80 too has been broken once. So the medium term trend is bearish for this stock.
Ramco Systems Limited:
Ramco Systems Limited is a Chennai based enterprise solutions and information technology services company. Its platform is known as Ramco Business Process Delivery System. The software solutions comprise of process manufacturing and optimization, business analytics, financial services and insurance etc. Services include data management and warehousing, customer relationship management, retail merchandise management etc. It declared a net loss of Rs.32.30 crores for the financial year 2006 – 07.
In the weekly chart shown below, the stock has not been able to conclusively penetrate its resistance at 233. Moreover, its support at 140.05 was broken in March this year. The rally in the last week of April was also not sustainable and the stock once again broke its previous support. However the support at the recent low of 118 is still intact. However, unless the stock closes above 190 with good volumes on weekly basis one cannot think of further uptrends in the stock for the medium term. That doesn’t seem likely since the daily chart shows that the stock had broken its 61.80% retracement at 145.50.
http://groups.google.com/group/theindiastreet/web/RAMCOSYS.JPG
Surya Pharmaceutical Limited:
Surya Pharmaceuticals Limited is involved in the manufacturing, customized development, marketing and distribution of various bulk drugs (active pharmaceutical ingredients), especially Penicillin derivatives. The product range includes antibiotics, oral formulations, antihistamines, anti-ulcerants, non sterile and sterile formulations (from next year). It reported a net profit of Rs.27.32 crores during last financial year.
The stock had fallen from a high of 177 in August 2005 to a low of 55.15 in June 2006. It managed to bounce back and touch a high of 98.60 within two weeks; since then, it is only witnessing sideways movement. The support at 66 was broken conclusively during March – April this year, as the stock closed below it consecutively for five weeks. During the process, it also broke its next support at 55.15 by making a new low of 54.20, though managing to bounce back. The scenario in daily charts is not encouraging either, as the stock has broken its short term support at 67 on July 12. It is difficult to visualize this stock getting past beyond its medium term resistance at 98.60.
http://groups.google.com/group/theindiastreet/web/SURYAPHARM.JPG
Conclusion:
When investing in stocks the short term or medium term trend has to be ascertained first. Stocks that move in sideways are likely to breakout either way and there is a risk involved with respect to price and holding time. Also, once a stock witnesses a bearish breakout, it may not be able to bounce back to its previous highs. Hence it is advisable to avoid stocks that are sideways. “Trend is your friend” and ride the trend accordingly!
Sundaramurthy Vadivelu
