Wednesday, June 17, 2009

Stock Chart Pattern - Voltas Ltd

The stock chart pattern of Voltas Ltd is based on strong fundamental foundations. Like many companies of the Tata group, Voltas has market leadership in its chosen area of manufacturing.

It produces solid, long-lasting goods and manages its finances conservatively. Steady growth in earnings, regular dividends, substantial order-book and a comfortable cushion of cash - just the kind of company I like.

Let us have a look at the 1 year bar chart pattern of Voltas Ltd:-


Voltas made a 'V' shaped bottom after hitting a low of Rs 31 on Mar 5, '09. On a rapid pick-up in volume, the stock surged to Rs 146 on Jun 10, '09. It encountered strong resistance at the 145-150 zone and has corrected down to seek support at its 20 day EMA.

A quick look at the technicals. The OBV is tracking the correction by moving down. The MACD is in positive territory but has moved below its signal line. The RSI has slipped below the overbought zone. The slow stochastic has done likewise, with the %K below the %D line. All the indicators point to a further drop in price.

The massive rise of 370% in 3 months was unsustainable and the correction should help the stock shed some weight for its next up move. Wait for the correction to play out. Meanwhile, you can do your research and read a detailed fundamental study of Voltas Ltd in this article.

Bottomline? A 38.2% or 50% Fibonacci retracement of the entire rise means a possible drop to the 90-100 zone. That would take the Voltas chart pattern near its 50 day EMA - a good entry opportunity for new investors. Existing investors should continue to hold.

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