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Thursday, June 18, 2009

Stock Chart Pattern - Sanghvi Movers

The stock chart pattern of Sanghvi Movers has a couple of interesting formations - one is very positive, and the other - which is still forming - is quite negative.

Before delving in to the details, a small confession. I have very little information about the management quality. But they seem to be on to a good thing. What is Sanghvi Movers' business? They hire out cranes for construction projects.

What is the big deal about that? It is just the kind of business the big boys will not get into. That has allowed this small-cap company (equity less than Rs 10 Crores) to become the largest crane hiring company in India, and the 3rd largest in Asia.

Sanghvi Movers' client list reads like a 'who's who' of the engineering and construction industry. They have close relationships with Reliance, BHEL and Suzlon. Robust cash flows from operations, growing earnings and dividends, more than 300 medium and large size cranes amongst its assets - all add up to a company whose future is tied to India's growth story.

The 1 year bar chart pattern of Sanghvi Movers shows that savvy investors have already caught on to the stock:-

Sanghvi Movers_June1809

After making an almost perfect bullish 'rounding bottom' formation with a low of Rs 60 made on Mar 4, '09, the stock moved up quickly and hit a high of Rs 199 yesterday.

Take a look at the pattern forming since the middle of May '09. If you draw a line connecting the tops, you will see a semi-circle being formed. Such a 'rounding top', if formed, is a bearish pattern that could lead to a sharp decline.

The RSI has been moving down as the stock has moved sideways for most of this month. The slow stochastic has moved down from the overbought zone and the %K line is below the %D line. The MACD is in positive territory but has gone below its signal line. All three indicators are showing negative divergences.

The OBV is the only indicator that looks bullish. But look a little closer. A sharp volume spike on Jun 2, '09 (a bulk deal?) moved the OBV into positive territory. Otherwise it was meandering below the '0' line, with a marginal rise during April and May '09. In fact, the pick up in volumes happened only during the past month.

Please note that Sanghvi Movers is a Rs 2 face-value stock, so the current price of Rs 177 is equivalent to Rs 885 for a Rs 10 face-value stock. Are there any other negatives? Yes, the huge debt. Obviously, the nature of the business is such that to keep up with the growth, the company needs to invest continuously in capital equipment.

Bottomline? On a correction, the stock chart pattern of Sanghvi Movers can move down to the Rs 120-130 levels and seek support from its 50 day EMA. Entry can be considered on the dip by intrepid investors for a 100% gain within a year or so.

1 comment:

Abhijit said...

Subhankarda,
I really appreciate your efforts. You are nearly hand holding us to understand the nuance of technical/fundamental analysis. thanks a lot Subhankarda