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Thursday, May 14, 2009

Stock Chart Pattern - Hindustan Unilever

One look at the stock chart pattern of Hindustan Lever (sorry, Unilever - I'm just too comfortable with the older name) and you will know why it is my all-time favourite 'defensive' stock.

HUL is unlikely to give you multi-bagger returns. The days of super growth in the detergent-soap-toothpaste segment of the FMCG sector are over. That happened back in the 1970s and 80s.

If you want to preserve your capital during vicious bear attacks and like steady returns from tax-free dividends, there are very few stocks that can match HUL. This is not a stock for day traders. But there are plenty of opportunities for longer term trading.

Without further ado, let's take a look at the long term weekly closing chart pattern of Hindustan Unilever:-


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

After making a low of 166 on Mar 7, '07 the stock entered a long term bull market of its own, trading within the up trend (green) channel that is not only intact but remained so right through the bear market from Jan '08 onwards.

A 'buy-and-hold' investor would have made a decent gain of 70% in a little less than two years, had he bought at 166 and sold at 267 in Dec '08 (including the dividends in between).

Also look at the trading opportunities for a more adventurous person. Every time the stock has come near the lower end of the channel it has jumped up.

The recent up trend in the Sensex from Mar '09 onwards has seen some selling in HUL and it has once again dropped down towards the lower end of the channel.

The RSI is about to enter the oversold region. The MACD and ROC are just below their zero lines. The slow stochastic is below the 50% line but still above the oversold zone. The stock may drift down a little more before it takes support at the lower trend line.

Bottomline? With the stock market undergoing a much needed correction, the HUL stock chart pattern looks poised for another rise within its bullish channel. Existing investors should hold on and await the dividend of Rs 4 per share announced recently. Bravehearts can enter now with a stop-loss at Rs 200.

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