In the previous update of the stock chart pattern of Bharti Airtel posted on May 25 ‘11 (marked by grey vertical line on the chart below), negative divergences in the technical indicators – which failed to touch new highs with the stock’s price (marked by blue arrows) – led to the following concluding comments:
“The stock chart pattern of Bharti Airtel is back in bull territory, but not yet out of the woods. Without a doubt, this is the best stock among the telecom service providers. But its glory days are behind it. As an investor, you always have choices. If you are going to invest in a slow growth, stalwart stock – would ITC or Dabur be better bets?”
If you are a die-hard fan of Bharti Airtel’s stock, you probably ignored my suggestion of a switch to ITC or Dabur. You may be suffering the consequences if you failed to sell when the stock hit its peak exactly a year ago. Incidentally, both ITC and Dabur would have been good candidates for a switch. While Bharti has lost 19% till date from its closing price of 369 on May 25 ‘11, ITC’s stock has gained 38% and Dabur’s stock gained a more modest 12%.
To grow one’s wealth, some times tough choices need to be made – specially when it involves getting rid of a hitherto outstanding performer in your portfolio. Many small investors must have faced a similar choice with the Infosys stock.
Despite the negative divergences marked in the daily bar chart pattern of Bharti Airtel, the stock kept rising for the next two months after my previous post and touched a two year high of 444.70 on Aug 1 ‘11. But it turned out to be a high volume ‘distribution day’ (open near day’s high and close near day’s low) that marked the end of a 14 months long bull rally. A small ‘rising wedge’ bearish pattern was formed as the stock touched its peak.
The subsequent bear phase in the stock’s price has completed a year. By touching an intra-day low of 280.10 on May 23 ‘12, the stock retraced 86% of its previous rally from the low of 254 (touched on Jun 2 ‘10). The ‘death cross’ of the 50 day EMA below the 200 day EMA in Dec ‘11 (marked by light blue oval) technically confirmed a bear market. The stock is trading below its falling 200 day EMA and the blue down trend line.
Technical indicators are bearish. MACD is falling below its signal line in negative territory. ROC is negative and below its 10 day MA, but trying to rise. RSI is moving sideways below its 50% level. Slow stochastic has entered its oversold zone.
Bottomline? The stock chart pattern of Bharti Airtel is falling deep into a bear market – touching lower tops and lower bottoms. The stock hasn’t found a bottom yet. There is no point in trying to catch a falling knife. If it falls below 280, it can test its Jun ‘10 low of 254. Avoid, till the stock price makes a reversal pattern. The company is under scrutiny by regulatory authorities for huge tax evasion.