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Sunday, January 23, 2011

Chart Patterns of 10 Sugar Sector Stocks

The Sugar sector is not one of my favourite sectors to invest in – and that is putting it mildly. For some strange reason, small investors seem particularly attracted to it. Probably because they enjoy consuming the product every day. Like all commodity sectors, the sugar sector has its ups and downs. Mostly downs – as you can see from the charts below. As in all sectors, there are always one or two stocks that buck the trend. Too many imponderables and too much government meddling makes this a sector small investors should avoid.

Bajaj Hindusthan

BajajHindustan_Jan2111

Bajaj Hindusthan is one of the bigger, and supposedly better, sugar companies. Not the stock, which is struggling to emerge out of a bear market. Note that the stock had a sharp rise above all four EMAs in Jun ‘10, only to meet heavy selling. In Nov ‘10, the stock reached a higher top but the four technical indicators made lower tops. A sharp correction followed.

The opposite is happening now. The stock touched a lower top but the technical indicators have reached higher tops. Any up move will provide an opportunity to sell. Why? The stock made a higher bottom in Nov ‘10 than the one in May ‘10. But the technical indicators have made flat or lower bottoms – signalling weakness. Avoid.

Balarampur Chini

BalrampurChini_Jan2111

Balarampur Chini was one of the better sugar stocks to invest in once upon a time. No longer. The management is keen to get rid of the company, but no one is agreeable to meet the price demanded. The stock is in a long-term bear market. Avoid.

DCM Shriram Industries

DCMShriramInd_Jan2111

The less said about DCM Shriram Industries the better. It is one of the most shareholder-unfriendly companies you can find. The stock is in a long-term bear market. Avoid.

Dhampur Sugar

DhampurSugar_Jan2111

Dhampur Sugar is struggling to emerge from a bear market. Periodic forays above the sliding 200 day EMA have been met with selling. Hold, with a stop-loss at 63.

Dwarikesh Sugar

DwarikeshSugar_Jan2111

Dwarikesh Sugar is faring slightly better than most sugar sector stocks. Though the stock is trading below the 200 day EMA, the long-term moving average is actually rising, which holds out some hope for the bulls. Hold, with a stop-loss at 75.

EID Parry

EIDParry_Jan2111

The EID Parry stock has been the star performer in the sugar sector. After touching the split-adjusted high of 290 earlier this month, the stock has corrected all the way down to its 200 day EMA. If the support holds, this could be a good buying opportunity. The technical indicators are in oversold territory, and an upward bounce is possible.

However, there is a bearish sign. Since Oct ‘10, the stock has made a broadening formation of higher tops and lower bottoms and can break downwards. Any buying should be with a strict 8% stop-loss.

Rajshree Sugar

RajshreeSugar_jan2111

Rajshree Sugar made a valiant effort to extricate itself from the bear grip. Since its Nov ‘10 top, it has been drifting down, making a bearish pattern of lower tops and lower bottoms. The 200 day EMA has started falling and the stock is trading below the long-term moving average. Sell.

Shree Renuka Sugar

ShreeREnuka_Jan2111

Shree Renuka Sugars has become one of the larger and better managed companies in the sector with a global scale of operations. The stock is consolidating within a triangle and is trading just above its rising 200 day EMA. Accumulate, with a stop-loss at 74.

Simbhaoli Sugar

SimbhaoliSugar_Jan2111

Simbhaoli Sugar is another stock struggling to get out of a bear market. The high volumes on up days indicate buying interest, but its efforts to remain above the 200 day EMA have not been successful. Hold, with a stop-loss at 40.

Ugar Sugar

UgarSugar_Jan2111

The chart pattern of Ugar Sugar is a bit of a surprise. It has made a bullish pattern of higher tops and higher bottoms since the double-bottom at 13 back in May ‘10. The up-trend line joining the May ‘10 and Aug ‘10 lows is holding. The stock seems to have found support at its 200 day EMA. Accumulate, with a stop-loss at 16.

Note: I don’t track the sugar sector, and have very little idea about the fundamental strength (or lack of it) of the stocks. Please do your own due diligence.

2 comments:

Jasi said...

For what its worth, Sree Renuka Sugar has received a lot of attention from investment point of view.

Mumbai Fan said...

I feel Renuka is the only stock holding on due to its diversification into markets like Brazil and also production of Ethanol. If crude goes up some of the stocks manufacturing ethanol should go up. Moreover keep a track of comex sugar. It has formed a saucer pattern. Any breakout will make sugar prices go up in world markets.