Friday, August 14, 2009

Stock Chart Pattern - Jagran Prakashan


The 2 years bar chart pattern of Jagran Prakashan is making a prolonged bullish saucer like formation that may see a new high in the medium term. But before we get to the technical nitty-gritties, a few words about the fundamentals.

The company's Hindi language newspaper, Dainik Jagran, not only has the largest circulation in the country, it exceeds the circulation of all the English language dailies put together.

Such a leadership position allows it to charge premium advertising rates which adds to profitability. It also owns, together with Yahoo, the largest Hindi language portal.

Steady growth into new towns and territories, decent profits, good cash flows from operations, regular dividends, managable debt - point to just the kind of stock that should find a place in any long-term portfolio. So, why did I pass it up when it was going abegging at 40?

Because of doubts about the management. This is a family-run outfit in the truest sense. That means, top management is stuffed with family members of various ages at fat salaries - some of whom are prone to bickering leading to litigation. That puts a question mark on the long term stability of the organisation in one's mind. The other negative is the high P/E of 33 which leaves very little 'margin of safety'.

Technically, the stock made a triple bottom and moved up from 40 to 105, which was a 50% Fibonacci retracement of the entire bear market fall from 170 to 40. Little wonder that it is facing resistance at current level.

The up move has seen three corrections, two of which took support at the 50 day EMA and one at the 200 day EMA. Such a move makes the likelihood of a further up move a little stronger. The next resistance should occur at 120, which is also near the 61.8% Fibonacci retracement of the bear market fall. Beyond 120, resistance levels are 140 and 170.

The four technical indicators - all oscillators - are tracking the stock movements. This is typical in long term charts, as the short term noise tend to get smoothened out.

Bottomline? The stock chart pattern of Jagran Prakashan is another example of why investors should worry less about index movements and concentrate on individual stocks.
Investors who like growth stocks can add a small quantity on a dip. This isn't a value play.

Related post

Are the media companies 'defensive'?

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