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Wednesday, January 25, 2012

Stock Chart Pattern - Sintex Industries (An Update)

In the previous update a year back, the concluding comments were:

“The stock chart pattern of Sintex Industries is an example of how a stock that appears to be fundamentally investment-worthy is to be avoided for technical reasons. Sell.”

Lately, there has been a lot of chatter in various investment groups about the stock – so it may be worthwhile to have a look at the two years bar chart pattern of Sintex Industries and find out if there has been any worthwhile changes to reconsider the earlier advice:

Sintex_Jan2512

A grey vertical line has been drawn to indicate the date on which the previous update was posted. Note that the expected ‘death cross’ (of the 50 day EMA below the 200 day EMA) happened a few days later, but the stock price found good support at 137 over the next two months and smartly bounced up above all three EMAs.

The rally topped out at 194 on May 31 ‘11 – much lower than its Nov ‘10 peak of 233, but higher than closing level of 168 when the previous update was posted in Jan ‘11. The three EMAs came quite close to each other, though they didn’t quite get entangled. This is often a precursor to a sharp move. The move came soon enough, but not before the stock price received good support from the 137 level once more during Aug ‘11.

Another upward bounce stalled just before reaching the falling 200 day EMA, and once the stock dropped below 137 in Sep ‘11, it fell in steps all the way down to 59 on Dec 16 ‘11 – losing 75% from its Nov ‘10 peak. Mid-cap (and small-cap) stocks find it very difficult to recover from such steep falls, and Sintex is unlikely to be an exception.

Despite a volume surge during the rally over the past month, the stock price has so far failed to climb above its falling 50 day EMA and is trading way below its 200 day EMA. The technical indicators are looking bullish, so the rally may not be quite over yet. The MACD is rising above its signal line, and is about to enter the positive zone. The ROC is positive, but has dipped below its 10 day MA. The RSI has just entered its overbought zone. The slow stochastic is about to do the same.

Bottomline? The chart pattern of Sintex Industries clearly shows that the bears are on top. The present rally should be used to exit the stock.

4 comments:

CHINTAN PATEL said...
This comment has been removed by a blog administrator.
Subhankar said...

Here is a report on the outstanding FCCB situation:

http://profit.ndtv.com/News/Article/sintex-shares-tumble-7-6-borrowing-to-rise-298588

Ajay said...

Dear Sir,

You have been spot on to say that sintex is headed much lower level. Now the stock is at 60levels. At this level, is there no value in the stock from long term perspective. FCCB against the cash holdings + other debt may take the net debt equity ratio to around 1:1.2, but still there is business thats doing well and they are growing? Whats your technical and fundamental view at this point.

Subhankar said...

Appreciate your comments, Ajay.

Technically, Sintex is hesitating to take the plunge below its Dec '11 low of 59. A slight selling push may drop it lower.

Fundamentally, the company is concentrating all its efforts towards repayment of its FCCB obligations. While that shows commendable integrity from management, their operations seem to be taking a hit.

It may be better to look at companies that are much stronger both technically and fundamentally.