The Top 5 Bullish Stocks for this Week

Analysis of select India stocks (short term perspective)

Disclosure

In this article let us review some stocks which are technically bullish for the short term. As I have mentioned in my earlier articles 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.

Celebrity Fashions Limited:

This is a Chennai based garment exporter company. It has the capability to manufacture the largest number of trousers in the country. The company also has its own national premier menswear brand, Indian Terrain. The clientele include Timberland, Marlboro Classics, Vans, Dockers San Franisco, The North Face, etc. Their design studio at Madras Export Processing Zone (MEPZ) has computer aided design and development for prints and plaids, trend analysis and lifestyle presentation. It recorded a net profit of Rs.9.41 crores in 2005 – 06; during 2006 – 07 it has reported a net loss of Rs.5.50 crores. EPS too has fallen from 7.19 to -3.09.

The company is being traded since January 2006. The issue price was Rs.180.

On the day of listing, 12 January 2006, it opened at 236.30 and touched a high of 269.90. It kept falling continuously and made a low of 62.10 on 13 June 2007. We have seen in my earlier article, “How do IPO’s perform in Secondary Market?” about how some of the IPO’s have done exceptionally well and some others have failed miserably.

This company has lost nearly 77% from its all time high. The daily chart of the stock is shown below:

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

The stock has made higher highs and higher lows according to Elliot Wave Theory recently. Though failed in first attempt, it has successfully broken its resistances at 72.70 and 76.75 yesterday. It has even managed to pierce its next resistance at 79.80 though not being able to close above it. Now we may conclude that the stock has bottomed out. This can be confirmed by the money flow index making new highs. 61.8% retracement from the low of 62.10 works out to 96.65.

Gallantt Metal Limited:

The company’s integrated steel plant is located at Kutch, Gujarat. It has the capacity to manufacture nearly 100,000 metric tonnes of sponge iron, 176,420 MT of mild steel billets and 168,300 MT of thermomechanically treated (TMT) bars. It cas a captive power plant too, 18 MW capacity from waste heat and lignite. The company made a loss of 0.976 crores in 2005 – 06 whereas it has made profits of Rs.3.96 crores in 2006 – 07 with a very low EPS of 0.52.

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

Watch the “cup and handle breakout” in the chart. It is a bullish continuation pattern. We have discussed this pattern in our articles “Buy These India Stocks and Hold for 6 Months” , “These 5 India Stocks Set to Move Up in the Short Term” and also in “5 India Stocks You Need to Own Now”. It can be observed that the pattern has taken about 7 months to complete. The next target for the stock is 17.95.

India Glycols Limited:

This is the only company in the world to produce ethylene oxide / mono ethylene glycol from molasses, a by product of sugar industry. Reliance Industries Limited has MEG plants at Hazira but ethylene is derived from naphtha cracker plant.

India Glycols Limited also produces ethoxylates, performance chemicals, glycol ethers / acetates, guar gum and potable alcohol. It is the largest ethoxylate, glycol ether producer and thus leader in ethylene oxide derivatives / surfactant business in India. It caters to more than 1,000 customers in various end use industries such as textile, agrochemical, oil & gas, personal care, pharmaceuticals, brake fluids, detergent, emulsion polymerisation & paints etc.

It reported a net profit of Rs.41.02 crores in 2006 – 07 at an EPS of 14.72.

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

The stock had retraced from a low of 99.65 on 28 March 2007 to a high of 153 on 15 May. It has now consolidated for 2 months as can be seen in the chart. On 13 July it had broken out its resistance with volumes. This confirms the bullish breakout. The technical targets for the stock are 202 and 215 once it closes above 172.50 where there is minor resistance (it has been broken on high price basis though.)

Karnataka Bank Limited:

Karnataka Bank Limited is a leading 'A' class scheduled commercial bank in India. It was incorporated on 18 February, 1924 at Mangalore. Over the years the bank grew with the merger of Sringeri Sharada Bank Limited, Chitladurg Bank Limited and Bank of Karnataka. It has a national presence with a network of 411 branches spread across 19 states and 2 Union Territories. There are about 2.6 million customers for this bank.

Karnataka Bank Limited had declared a net profit of Rs.177.03 crores for the financial year 2006 – 07 at an EPS of 14.6.

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

Both weekly and daily charts have been shown above. The weekly chart clearly indicates the bullishness for medium term. Watch the bollinger bands contracting towards each other as prices open up. It has broken its resistance in daily chart on 17 July 2007. Short term target works out to 223 and medium term target around 261.

Usha Martin Limited:

This company manufactures steel wires and ropes (at Ranchi), alloys and steels (Jamshedpur), machinery for wire drawing (Bangalore), pre-stressing equipment & accessories (Ranchi) and underground telecommunication cables (subsidiary company Usha Martin Cables near Ranchi). It reported a net profit of Rs.137.45 for the financial year 2006 – 07 at an EPS of 30.32.

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

Both weekly and daily charts are shown above. We can see the consolidation pattern of about 2 months in daily chart followed by the resistance breakout with volumes. The stock is bullish in weekly as well as monthly charts. The short term target for the stock works out to 340.

SUNDARAMURTHY VADIVELU

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'Sectorwise' performance: Myth or miracle?

By Sundaramurthy Vadivelu

Important Disclosure

The views expressed below are unbiased and informative in nature. These do not constitute an offer to buy or sell stocks. Every effort has been made by the author to ensure correctness of the information presented. The author cannot be held responsible for omissions, mistakes etc. Investing or trading in stock markets is a high risk activity. Those who cannot afford to risk their money should refrain from dealing in stocks. The author has no vested interest in any of the stocks mentioned. He and/or his close associates may or may not be having positions at the time of writing this article. It is to be understood clearly that this article has been written purely for informative purposes only and the author cannot take any responsbility whatsoever for transactions, if any, entered into by the reader. Source for the price data displayed in graphics and tables: National Stock Exchange of India Limited, Mumbai, India (www.nseindia.com). Charts have been created with FCharts Pro, © Spacejock Software, Australia (www.spacejock.com).

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Introduction: In a stock exchange, several companies are listed. Some of them belong to a particular industry or “sector”. For example, in the banking sector there are several listed banks, public sector banks such as State Bank of India, Punjab National Bank, Indian Overseas Bank etc. Examples of private sector banks include Karur Vysya Bank, Kotak Mahindra Bank, Karnataka Bank etc. In the popular financial newspapers, magazines and television channels we often encounter reports like “the sugar sector is performing extremely well”, “the media sector is on fire”, “the textile stocks are outperforming the overall market” etc. This essentially means that the stocks from a particular sector are wanted by the crowd strongly compared to some other sector. Why does this happen? If anyone had been an active market participant, he would know what the normal stock market practice is. 1. Some people have their own ideas, they think the time has come to enter a particular stock or exit. They are “intution” based investors. 2. Few invest or trade based on others’ view or reports. There are hundreds of web sites and magazines offering investment advice, such as buy/hold/sell strategy. Some TV Channels allocate a time slot exclusively for this purpose. 3. Part timers believe in “buy on rumour and sell on news”. They somehow manage to get information from “reliable” sources and act accordingly. This may or may not work all the time. 4. People who know the risks and rewards of stock market, the professionals always try to analyze the market and form a strategy that suits them with regard to time frame and profit margin. These people are somewhat rare. Usually, a stock runs up expecting some “good news” or “positive news”. For example, depreciation of rupee value could be a booster for the software industry since they will get more rupee for each dollar earned. The federal government may allow export of a commodity more than the usual quota or a company may acquire another well performing company. Example of “bad news” or “negative news” may include losing a lawsuit, loss of revenue due to changing business conditions, price increase of a certain commodity (such as aviation turbine fuel may be negative for airline sector). People may have noticed that the stock may not go up as positive news was published in the media. This is because the stock has already run up expecting the news. The stock price, usually goes up or down, whether in the short, medium or long term as and when this kind of situation arises. The demand can be seen for a stock when the crowd expects a positive news and a sell off can be witnessed when the crowd anticipates a negative news. The daily chart of UTV Software Communications Limited is shown below. The stock ran up sharply from 179.55 on 01/11/06 to 278.65 on 14/11/06. The following text is from http://www.nseindia.com regarding this stock dated 08.11.06: “The media had reports that News Corp may pick up a sizeable stake in UTV Software Communications Limited. The Exchange, in order to verify the accuracy or otherwise of the information reported in the media and to inform the market place so that the interest of the investors is safeguarded, had written to the officials of the company. UTV Software Communications Limited has vide its letter inter-alia stated, "Please note that the article is an independent story by the publication and did not emanate from any official press release from the Company. As regards the news article, 'News Corp eyeing sizeable stake in UTV', we have to say that, at present there are no such proposals having been discussed by the Board of Directors of the nature stated in the news report." So the company did deny such rumours floating in the media. But few days later, more news came out, this time though, it was issued by the company itself: (Source: Corporate Announcments in www.nseindia.com) Dated 24.11.06: “Utv Software Communications Limited has informed the Exchange that the Company has received the approval from Government of India, Ministry of Finance, Department of Economic Affairs, Foreign Investment Promotion Board (FIPB) unit granting its approval for the acquisition of the entire shareholding by The Walt Disney Company (Southeast Asia) Pte Ltd (Disney) in United Home Entertainment Limited (Hungama TV). The said entire shareholding of Hungama TV is being acquired by Disney at an enterprise value of USD 31.125 million” Dated 27.11.06 “Utv Software Communications Limited has informed the Exchange that the Company has entered into a term sheet with Astro Multimedia International (BVI) Limited (Astro) for establishing a television channel joint venture business in India, South Asia and South East Asia. The scope of business of the joint venture company will be to create, develop, produce, own and operate one or more TV broadcast channels targeted at the age group of 15 to 25 in India, South Asia and South East Asia. The Company and Astro will hold 50% each of the equity capital of the Joint venture company. The aforesaid is subject to all regulatory approvals required for operating televisions channels in the territory being obtained and definitive agreements.” Dated 08.12.06 “Utv Software Communications Limited has informed the Exchange that "The Company (1) Has entered into an arrangement with Indiagames Limited and its promoters for acquisition of controlling equity stake in Indiagames Limited, a Mumbai based mobile and online gaming company for a consideration of around Rs. 68 crores. (2) Has entered into an arrangement with Ignition Entertainment Limited and its promoters for acquisition of controlling equity stake in Ignition Entertainment Limited, a UK based company involved in developing console games for a consideration of around Rs. 60 crores. (3) Has initiated development of animation movie projects with total investments to the tune of Rs. 135 crores over a period of next three years.” It can clearly be seen that the stock ran up expecting positive news. The story floating in the market place was obviously something different, but ultimately there was some news officially declared by the company. The above was just an example of a particular stock moving up based on expectation of positive news. The sector wise movment was noticed between October 2003 and April 2006 in the same manner in sugar stocks. The following table gives the stocks’ appreciation in sugar sector. * Adjusted close price due to stock split So, what was the bad news in May 2006 that started the “steep” fall to the current levels? http://in.biz.yahoo.com/061213/203/6a9mw.html says: “…In response to the rising prices in the domestic market, the government had clamped a ban on sugar exports in July, 2006. The global prices were lucrative at at time, ruling in the range of $420 to $460 a tonne. The domestic price rise was due to a combination of several factors like hoarding and manipulation in the future markets and not due to shortage. Since the imposition of the export ban, the industry has been lobbying for its removal. The government had at the same time also allowed sugar imports against low duty, but no substantial amount has entered the country…” It can be clearly seen that the market participants knew that the bad news was already on the the cards and decline started in May 2006. Conclusion: The news based buying or selling is not a great strategy for an ordinary investor. Rather, he should look for increasing his profits either by his own research or getting some qualified expert advice. News based rally never really losts long.