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Wednesday, April 29, 2009

Stock Chart Pattern - Bharti Airtel

The stock chart pattern of Bharti Airtel will reveal why it is one of the favourite stocks of institutional and retail investors. Not only has the company provided innovative products and services, its rapid growth has provided huge capital appreciation to investors.

Today it has announced a maiden dividend and a 2:1 stock split. That should further consolidate its leadership position as the stock-to-own in the telecom services sector.

The 6 months closing chart pattern of Bharti Airtel shows that it has been outperforming the Sensex during the recent rally:-

Bharti_Apr2809

(Please right-click on the image above and open it in a new tab or window for a better view.)

Bharti had six straight closes above its 200 day EMA, while the Sensex continued to play hide-and-seek with its long-term average. The rise from the Mar '09 low has also been much sharper than that of the Sensex.

The 20 day EMA has moved well above the 50 day EMA and is likely to pierce the 200 day EMA from below. That will be the first confirmation that Bharti Airtel has entered a bull phase.

The slow stochastics is comfortably ensconced in the overbought zone and not showing any signs of moving out. The MACD and its signal line are both rising.  The RSI is about to enter the overbought zone. All good signs for the up move to continue.

But there are a few contra-indications. The ROC has turned down. Bharti's rise during the rally has been a bit too steep. Steep rallies tend to correct sharply as well. The biggest concern is the volume - or the lack of it. Such a rally should have been supported by a rapid rise in volumes. That hasn't happened - and is a negative sign.

Bottomline? An existing holder can keep riding the rally or book partial profits. Potential investors in Bharti Airtel should keep observing the chart pattern for a decent correction and then enter.

2 comments:

rajesh said...

Your analysis on Bharti is very clear. Yes it has surprised everyone on the upside. Though closing above 200 dma is fine, as you have said, the rise is too seep. Expecting a sharp fall, as with the markets.

Subhankar said...

Thanks, Rajesh.

Every one has been expecting a big correction in the market, but it just keeps moving up with renewed vigour! Let us hope that small investors don't get sucked into this rally.