Avoid the Deccan Chronicle and these other 4 Stocks

(short term perspective)

Sundaramurthy Vadivelu

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Now that the Sensex has crossed 16000 many investors and traders feel extremely buoyant and would like to find investment or trading opportunities. The India Street attempts to find 5 stocks that are bearish for short term.

Summary:

Scrip	Group	Scrip Code	Price 19-Sep
Deccan Chronicle	B1	532608	210.50
MindTree Consulting	B1	532819	551.40
Shah Alloys	B1	513436	63.70
Taj GVK Hotels	B1	532390	136.45
Wire & Wireless India	B1	532795	48.80

Deccan Chronicle Holdings Limited (Group: B1, Scrip Code: 532608):

The company publishes Deccan Chronicle, a leading English daily in Andhra Pradesh. It is also published from Chennai. The total certified circulation is about 0.9 million copies. Andhra Bhoomi is the Telugu newspaper published by the company. The net profits for the year 2006 – 07 were worth Rs.162 crores.

http://groups.google.com/group/theindiastreet/web/DCHL_200907.jpg

In the daily chart, a bearish “Triple Top” formation could be observed. At the resistance levels, a bearish “Three Outside Down” candlestick pattern has also been formed. Following these two patterns, a heavy sell off occurred in the stock on September 14. In the process, the stock had broken its short term support at 205.75. Any rally in the stock should be used to exit the holdings. The next major support for the stock is at 140.

MindTree Consulting Limited (Group: B1, Scrip Code: 532819):

MindTree is a Bangalore based IT services company. It has presence in US, UK, Japan, Germany, Singapore, Sweden, UAE and Australia. The services include supply chain management, data warehousing, enterprise resource planning, web services, infrastructure management etc. and the industries served by these are financial services, transportation, capital markets and manufacturing. It declared a net profit of Rs.90 crores for the financial year 2006 – 07. MindTree came out with an IPO earlier this year and the offer price was Rs.425.

http://groups.google.com/group/theindiastreet/web/MINDTREE_200907.jpg

MindTree got listed on March 7 this year and it opened with a premium of 202 at 627. On March 15 it touched a high of 1023. But it has been on a continuous downtrend since then. On August 6 it closed below its previous low of 576. The stock gained marginally and went upto a high of 614; but it has once again gone below 576. The low at 520.35 was broken on September 10. The volumes are also subdued and there is nothing this stock can offer for the short term investors.

Shah Alloys Limited (Group B1, Scrip Code: 513436):

Shah Alloys manufactures various grades of stainless steels (utensil, austenitic/martensitic), stainless steel plates/hot rolled coils, stainless steel bars/wires/angles/flats etc. The production capacity of the facility is about 200,000 tonnes per year. The company has a market share of more than 20%. Its net profits for the last 4 financial years i.e. from 2003 – 04 were 33, 44, 33 and 39 crore rupees.

http://groups.google.com/group/theindiastreet/web/SHAHALLOYS_200907.jpg

The stock however, has lost more than 75% since May last year, when it recorded a high of 250. In the above chart, the support at 74.50 was broken on August 1. It got some buying support afterwards. But its new low of 61 got broken on September 14 and the stock closed at 60.10. The stock looks very bearish in medium term charts too and it is not advisible to enter long positions for short term.

Incidentally some of the other metal stocks like Tata Sponge, Ispat Industries, Sunflag Iron and Gallant Metals have gained reasonably well in the recent past. The crowd has turned a blind eye towards Shah Alloys.

Taj GVK Hotels and Resorts Limited (Group: B1, Scrip Code: 532390):

Taj GVK Hotels and Resorts is a joint venture between Indian Hotels (a Tata group company) and GVK group. Indian Hotels has 25.5% stake and GVK group has about 35% stake. Taj GVK owns three 5 star hotels in Hyderabad (Taj Krishna, Taj Banjara and Taj Residency) having total of 575 rooms. It declared a net profit of Rs.64.3 crores for the financial year 2006 – 07.

http://groups.google.com/group/theindiastreet/web/TAJGVK_200907.jpg

This stock too, has lost more than 60% from its May 2006 high of 341.90. It broke the support at 149 on August 17. It has not bounced back. When many stocks were trading in green yesterday, this stock lost about 1.37% with increased volume, indicating a sell off. This stock is bearish for short term; it created a new low yesterday by breaking the 136.25 made on August 22.

Wire and Wireless India Limited (Group: B1, Scrip Code: 532795):

Wire and Wireless India Limited is a part of the Essel group having presence in 43 cities. It has interests in media programming, broadcast and distribution, specialty packaging, entertainment, telecom and trading. WWIL provides video on demand, pay per view, Electronic Program Guide (EPG), live gaming through a Set Top Box (STB), etc. It declared a net loss of Rs.20 crore for the quarter ended June 2007.

http://groups.google.com/group/theindiastreet/web/WWIL_200907.jpg

This stock is just for the bears, as can be seen from the above chart. It never really had an uptrend after it got listed at the beginning of this year. It broke the support at 54.50 on August 17 and continues to trade below it. The stock looks extremely bearish for the short term and it will be a while before the crowd shows some interest.

Sundaramurthy Vadivelu

Suggested Reading

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Buy These India Stocks and Hold for 6 Months

Analysis of select India stocks (medium term perspective)

Disclosure

In this article we shall review five stocks that look technically good for medium term. The patterns and breakouts discussed are based on weekly charts.

Cosmo Films Limited:

Cosmo Films is the largest exporter of bi axially oriented polypropylene films in India. It has a manufacturing capacity of 60,000 Tonnes of BOPP and 8,000 Tonnes of thermal lamination film. The films are classifed as transparent (coatings and tapes, bakery products packaging, cigarettes wrap etc.) , white and pearlized (soft drink bottles), pigmented (food packaging), metallizable (biscuits/food packaging) and speciality films (visiting cards, posters, calenders, brochures etc.). The company has reported a net profit of Rs.24.82 crores in 2006 – 07 at an EPS of 12.77.

http://groups.google.com/group/theindiastreet/web/COSMOFILMS.JPG

In my earlier article, “Chart Patterns and market’s reaction” we discussed about inverse head and shoulder pattern. We find the same here in weekly charts. The “left shoulder”, the “head” and the “right shoulder” can be seen clearly in the above chart. On breakout above the neckline, the volumes are increasing. It is a confirmation of the pattern formation. The next resistances are at 114 and 139.

HEG Limited:

HEG is Asia's leading graphite electrodes manufacturer and exporter. The company has four dvisions: graphite electrode manufacturing, captive power plant, steel billets manufactring and carbon speciality. HEG won the country's top export award (CAPEXCIL) for 17 consecutive years. It has the largest integrated graphite electrodes plant in south east asia / middle east and second largest in the world. The company’s net profit for 2006 – 07 turned out to be Rs.73.84 crores at an EPS of 18.32.

http://groups.google.com/group/theindiastreet/web/HEG.JPG

A “cup and handle” breakout pattern has been observed in the weekly charts of HEG. It can be seen that the cup formation has taken about 6.5 months and the handle formation about 7 months. Pattern is confirmed by resistance breakout with volumes this week. The target for the stock can be measured by subtracting the low of the cup from its right peak, which works out to be 306.

Rohit Ferro Tech Limited:

The Company manufactures High Carbon Ferro Chrome (HCFeCr), Ferro Manganese (FeMn) and Silico Manganese (SiMn) through Submerged Arc Furnace (SAF) route, with the total combined capacity of more than 175,000 Tonnes per year.

It is a part of the Impex group which manufactures various ferro alloys. The company was accredited ISO 9001:2000 in August 2004. It also received Two Star Export House Status. The net profit for the financial year 2006 – 07 stood at Rs.19.22 crores at an EPS of 6.61.

http://groups.google.com/group/theindiastreet/web/ROHITFERRO.JPG

This stock is yet another example of losing more than 50% in the bull market. It fell from 61.70 in May 2006 to a low of 24 in March 2007. A small uptrend had started afterwards. But the resistance trendline could not be broken (see the negatively sloped line). Now it has broken the horizontal resistance line as well as the resistance trendline. The next resistances for the stock are 44.60 and 58.95.

Kirloskar Oil Engines Limited:

Kirloskar Oil Engines is a well known Pune based engineering company. The Kirloskar group is worth nearly US $ 600 million. The Kirloskar Group makes equipment, machinery and high precision engineering products for the transport sector, including ship building, railways, roads and cargo. They also have a major presence in auto components, process industries, rubber and plastics, textiles and also consumer goods industries. Kirloskar Oil Engines’ product range includes diesel engines, irrigation pumpsets, diesel generating sets, engine bearings, engine valves and grey iron castings.

The company’s net profit for the year 2006 – 07 was Rs.178.41 crores at an EPS of 16.07.

http://groups.google.com/group/theindiastreet/web/KIRLOSOIL.JPG

One more nearly “cup and handle” breakout. Nearly, because the cup is almost a “V” whereas it needs to be very much like a “cup”. Still, it had taken about 7 months each to form for the cup and handle. It is a bullish continuation pattern. The stock had broken its resistance this week. Target for the stock works out to be 456.

Zee Entertainment Enterprises Limited:

India’s premier Hindi entertainment network Zee has more than 225 million viewers across the globe. In the last 10 years it has won numerous awards both in India and abroad. It has a audience in 80 countries worldwide. The channels include Zee TV, Zee Cinema, Zee Music, Zee Café (English), Zee Studio and Zee Trends. Its cable TV business is now under a separate company known as Wire and Wireless India Limited, a listed company at both BSE and NSE.

Zee was awarded "BSE Award for Maximization of Shareholders Wealth - 2000" . The net profit for the company during 2006 – 07 was reported to be Rs.167.79 crores at an EPS of 3.96.

http://groups.google.com/group/theindiastreet/web/ZEEL.JPG

Watch the “ascending triangle breakout” in the chart. It is again a bullish continuation pattern. We have discussed about this pattern in my first weekly review of Indian stock market. The triangle height is 111.4, which when added to the previous high of 319.40 gives a target of 430.80.

SUNDARAMURTHY VADIVELU

Some Recent Stocks Gainers We Suggested
Symbol	Percent increase
PFC IBREALEST INDIANB ORBITCORP HIKAL SREINTFIN DENABANK ARVINDMILL GVKPIL	11.70% 9.42% 7.95% 7.55% 5.85% 5.53% 5.17% 5.16% 5.01%

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