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Tuesday, June 9, 2009

Stock Chart Pattern - Sintex Industries

The stock chart pattern of Sintex Industries gives clear indication that this fundamentally strong company is coming out of the down turn well. No wonder it has caught the recent attention of the pink papers.

The claim to fame of Sintex was the almost ubiquitous black plastic water storage tanks atop recently constructed houses. The company has moved on to bigger and better products which they sell to the global market place. Their pre-fabricated low-cost housing products order book exceeds their 2008-09 revenues by three times, as per this article.

What I like about the company is the growth in earnings, regular dividends, and positive cash flows from operations. But all is not peaches and cream. The growth in earnings has not been matched by a growth in cash flows from operations. Increasing interest payments is another concern.

Let us take a look at the one year bar chart pattern of Sintex Industries to see what the technicals are indicating:-

Sintex_Jun0909

After making a low of Rs 70 on Mar 12, '09 the stock reversed trend and made a high of Rs 250 last Friday (Jun 5, '09) - rising more than 2.5 times on higher volumes in less than 3 months. The 'V' shaped bottom formation has been marked on the chart pattern.

After the sharp rise, the stock is consolidating sideways and has taken support from its 20 day EMA. In the process, the technical indicators have dropped from overbought zones.

The %K line of the slow stochastic has slipped below the %D line. The MACD has gone below its signal line. The RSI has moved down to its 50% level. Note how the RSI had reached heavily oversold levels in early March '09 - just before the stock chart pattern reversed direction. The ROC is marginally in the positive zone.

Bottomline? Long-term investors can consider putting Sintex Industries on their watch-list. It is a Rs 2 face-value stock and one should plan to add only on a correction to the Rs 140-150 level. Existing holders can book some partial profits.

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