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Wednesday, December 23, 2009

Stock Chart Pattern - Navneet Publications

The stock chart pattern of Navneet Publications gives a clear indication that it is fancied by the investor community. And why not?

A four decade old publishing house in the educational segment that has steady growth, positive cash flows from operations, low debt, low P/E, regular dividend payments and more than 60% equity holding by the promoters are enough reasons for the stock to find a place in any long-term investor's portfolio.

The educational publication division generates more than 50% of the revenues and the bulk of the profits. But it is a low-growth business. The government supplying free books to school children under the 'Education for All' programme is a growth-dampener. Lack of regular revision in school syllabi also hampers growth. Add to that the problem of book piracy faced by all established publication houses.

The stationery side of the business is growing much faster, but it has low margins which is beginning to affect the overall profitability of the company.

Let us now take a look at the 1 year bar chart pattern of Navneet Publications:-

Navneet_Dec2309

From the high of 66 (the 3:2 bonus-adjusted price of this Rs 2 face-value stock) made in Jan '08 the stock dropped to a low of 14 in Oct '08. The smart rally from Mar '09 took the stock all the way to a high of 45 in Sep '09, retracing nearly 60% of the entire bear market fall.

The resistance from near the 61.8% Fibonacci retracement level proved too strong. Thereafter, the stock has been in a flag-like sideways consolidation.

Such a pattern is usually a continuation formation which should end with an upward break out. But things are looking a bit bearish at the moment with the stock slipping below its 50 day EMA and dragging the 20 day EMA down with it.

The MACD has entered the negative zone and is marginally below the signal line. The MFI has bounced off the 50% level after a couple of visits below it. But bulls can take heart from the OBV which has been gradually rising during the consolidation phase.

Bottomline? The stock chart pattern of Navneet Publications is indicating accumulation by the smart money. Investors can buy in small lots with a stop-loss at 32. On an upward break out, the stock can move up to 70 in the medium term.

(A hat-tip to reader Ruy for suggesting this stock.)

6 comments:

Ruy said...

Thanks Subhankar babu for posting the TA of Navneet. I have bought Navneet about 3 months back at 38 levels. It is one of those stocks which I bought for purpose of "buy-and-forget" as it generates strong free cash flows alongwith a healthy dividend yield of 5%. It may not set the charts on fire but it should fall under your category of safe and sound stocks akin to FMCG and Pharma!

God Bless you!

Jasi said...

Nice analysis sir! Could you please take a look and comment on Aban Offshore Lloyd?
Thanks, as always :)

Subhankar said...

@Ruy: Appreciate your comments. Those are excellent reasons to buy a stock for long-term investment.

@Jasi: There are several sectors that I don't track. Offshore oil and gas drilling is one of them. Will take a look at the financials of Aban.

Jasi said...

Thanks sir! Much appreciate your reply! :)
Though this time we had to wait just a lil while long. This is what having a guide does to you, you get anxious if even for a lil while he goes away ;)

Narinder Kumar said...

SubhankarDa,

Navneet has touched 70 mid-term level as analised by you. Kudos for this timely pick. If time permit, please do re-visit this script. Any further advice will be highly appreciated.

Thanks,
N K Rana

Subhankar said...

Thanks for your comments, Narinder.

The credit for the pick should go to Ruy, who had requested me to analyse the stock's chart.

And the credit for benefiting from the near doubling of the stock's price since I wrote about it goes to the share holders who had the conviction to hold on to the stock.

For a technical update of Navneet, check today's blog post.