Wednesday, August 26, 2009

Stock Chart Pattern - Havell's India

The stock chart pattern of Havell's India is not that different from several other stock chart patterns discussed on this blog. The real difference lies in how a staid 50 years old low-end electrical equipment manufacturing company has managed to carve a niche for itself.

Industrial and domestic electrical switches, cables and wires, motors, fans and light fixtures isn't exactly a high margin product range to drool over. Against stiff competition from the organised and unorganised sector, the quality of their products has brought them fame and fortune from top clients in India, and export tie-ups with big overseas names like GE, Siemens-Electrium, Eatons, Geyer, Proteus.

60% promoter holding, nearly 18% FII holding, good growth through capacity expansion, regular dividends, strong cash flows from operations, low debt, low equity, huge reserves, back-to-back 1:1 bonus issues in 2005 and 2006 are adequate reasons for investors to put this stock on top of their buy list.

Let us take a look at the one year bar chart pattern of Havell's India to see if this is a good time to enter or not:-


After making a high of 750 (face value Rs 5) on Oct 18, '07, the stock entered a long term bear market triggered by its $300 Million acquisition of Sylvania, Germany's lighting business.

After a huge fall of 650, it made a double bottom at 100 (on Dec 2, '08) and 101 (on Mar 9, '09) before embarking on a sharp rally that took it to 332 on Jun 2, '09 - retracing 36% of the entire bear market fall (just below the 38.2% Fibonacci level of 348).

The stock is consolidating sideways for the past 3 months and has received good support from its 50 day EMA, which is rising along with the 200 day EMA.

Volumes haven't been great, but that's expected during a consolidation phase. The RSI has moved above the 50% level. So has the slow stochastic, with the %K line above the %D.

Bottomline? The stock chart pattern of Havell's India is beginning to show a bullish 'ascending triangle' formation, which has an upward breakout probability. A consolidation after an up move is usually a continuation pattern. That means, the direction of the move before entering the consolidation pattern will continue. Investors can make a small investment now, or wait for the upward breakout to get in.

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