Wednesday, March 10, 2010

Stock Chart Pattern - Sintex Industries (An Update)

My previous look at the stock chart pattern of Sintex Industries was 9 months ago. The stock had jumped more than 250% from a low of 70 to a high of 250 in 3 months before pausing for breath. I had then advised investors to await a correction to the 140-150 level before adding this Rs 2 face value stock.

Let us have a look at the 1 year bar chart pattern of the Sintex Industries stock to check its progress through this long bull rally:-

Sintex_Mar1010

The stock did correct, but only down to 183 in July '09 before embarking on an up move that took it to a new high of 297 in Jan '10. Note that both the RSI and MFI made slightly lower tops while the stock made a new high.

The negative divergence led to a correction down to 233 before the post-budget bullishness pushed the stock up to today's high of 280 on decent volumes. Will the stock break above its previous top of 300?

The stock has long term resistance at the 300-310 zone. Also have a look at the RSI and MFI. Both are touching their overbought zones - from where they have retreated several times earlier. Chances are that the current up move may make limited progress.

The consolidated profits for Q3 '09 were flat while the standalone profits dipped more than 11%. The fly in the ointment was the poor performance of the textile segment and the not-so-great results of its overseas acquisitions.

With the automobile plastic moldings segment showing an up tick and the overall plastics business contributing nearly 87% of total revenues, the company should get back on the higher profits track from next year. The steady rise in the OBV indicates that investors are logging in.

After a dip in 2008, the cash flows from operations have perked up considerably. The company had resorted to a lot of borrowing (for a failed German acquisition) and is therefore sitting on a cash pile. A few more acquisitions may be on the cards. It acquired 6 companies in the past 2 years - 2 in the USA, 1 in France and 3 in India.

In the longer term charts, the stock had made a mountain-like pattern with a peak at 615 in Jan '08 followed by a steep drop of 88.6% to 70 in Mar '09. Small and mid-cap stocks usually have a tough time recovering from such huge falls. It is no wonder that the stock has retraced only 42% of its bear market fall and hasn't gained much in the past 9 months.

Bottomline? The stock chart pattern of Sintex Industries is getting close to a resistance zone with limited up side potential. Add only after a deep correction down to the 150-180 band. Existing holders can take some profits home.

3 comments:

Titu said...

Hello Sir,

Today sinyex india is trading in 177-180 rs, will it is a buy for 1-2 year

Please guide

-titu

Subhankar said...

The stock's face value was split from Rs 2 to Re 1 after I wrote the post - so the price targets should be adjusted suitably.

At current price there is no Margin of Safety.

Subhankar said...

An interesting article about Sintex:

http://www.business-standard.com/india/news/sintex-industries-attractive-valuations/420159/