Wednesday, May 13, 2009

Stock chart pattern discussions - hits and misses

In my individual stock chart pattern discussions on Wednesdays, 10 stocks have been covered so far. It may be worthwhile to do a reality check to find out what I had observed and inferred and how the chart patterns actually shaped up.

1.  ICI India - ICI had pierced and closed above its 200 day EMA before dropping below, and was consolidating between the 50 day and 200 day EMAs around the Rs 416 level. I had suggested: Good stock to accumulate in small quantities for conservative, long term investors.


The stock has slowly but steadily moved up well above its 200 day EMA and added about 15%. Nothing great, but can be counted as a 'hit'.

2.  Suzlon Energy - The stock was looking oversold. There was a possibility of a bounce up, but it could also go lower. My advice: Investors should not go anywhere near this stock. Adventurous traders may want to make a punt with very tight stop losses.


After going marginally lower, the stock moved up rapidly with the global rally and jumped up by almost 150%! It is still well below its 200 day EMA in spite of the sharp rise. A 'miss'.

3.  State Bank - SBI was looking like a value buy as it was trading at its book value. I observed the strong support at 900, but did not expect an up move to go beyond 1100.


SBI moved up 40% with the global rally before facing resistance at a previous top of 1400. Another 'miss'.

4.  Unitech - The stock was being accumulated near its 52 week bottom and I expected a move upwards. But advised: Unless the strong resistance between 50-60 levels is overcome, there is no point in entering Unitech.


The stock did move up to the resistance zone of 50-60, but despite two attempts, was unable to cross it. A 'hit'.

5.  Hero Honda - This was one of the few stocks in a bull phase but at 1100 level was looking overbought and due for a correction. My suggestion: New investors may buy on dips. Existing investors should hang on tight and enjoy the ride.


After correcting to Rs 1000, the stock has steadily moved up to Rs 1200 and continues in its bull phase with all three averages moving up.

6.  Reliance Capital - I had expected the stock to face some resistance at 490-500 before moving up to 625 level, and had advised short and long term investors to get in at the next dip.


Reliance Capital sailed upwards to 580, reacted to 490 and then moved up to 625, where it faced resistance. I will count that as a 'hit', though the short term gain was only about 30%.

7.  Infosys - Despite a sell-off due to disappointing results that dropped the stock below its 200 day EMA, I had observed a 'rounding bottom' bullish pattern and advised: Wait for the selling pressure to subside before entering the stock on the dip. Be prepared for a longish wait for profits.


The stock smoothly moved up from Rs 1300 to Rs 1600, well above its 200 day EMA. Another 'hit'.

8.  DLF -  A 'rounding bottom' bullish pattern was observed but the failure to cross the resistance level of Rs 300 led me to suggest: If you haven't got rid of your DLF holding yet, you may get one more chance to do so. There is a possibility that this rally is taking a pause before trying to move higher again.


The stock moved down to Rs 220 before moving up to Rs 269 to provide one more chance for investors to get out. A 'hit'.

9.  Bharti Airtel - The upward rally looked too steep. The lower volumes remain a concern. The 20 day EMA did move up above the 200 day EMA as expected. My advice: An existing holder can keep riding the rally or book partial profits.


The stock has continued its upward move with a slight dip for 2 days. A 'hit'.

10. Balrampur Chini - The 50 day EMA did move above the 200 day EMA but instead of a correction, the stock is undergoing a triangular consolidation before the next up move. My suggestion: I would wait till the election results come out before entering.


It has been only five trading sessions since my discussion - too early to draw conclusions. A 'neutral'.

Without trying to be immodest, not a bad performance at all. Comments are welcome.

(Note: Please right-click on the charts and open them in a new tab or window for a better view.)

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