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Saturday, August 8, 2015

Should you look at stocks from the Consumer Durables sector?

The short answer to the question is: Yes. The business models of most consumer durables sector companies are reasonably easy to understand.

With economic growth, disposable income in the hands of consumers is increasing. That leads to buying of higher-priced products and more frequent replacement purchases.

However, not all companies in the sector are doing equally well. So, stock picking and chart reading skills will separate the men from the boys. Given below are the 2 years closing charts of 8 stocks from the sector.

Bajaj Electricals

BajajElec_Aug15

The stock closed at a 2 years high of 377 in May ‘14 but formed a ‘double top’ reversal pattern by closing at a lower top of 372 in Jul ‘14. A 5 months long correction dropped the stock below all three EMAs into bear territory.

The stock successfully tested support from the 200 level in Nov ‘14 and has been in a gradual up move since then. The resistance level of 300 needs to be crossed convincingly for the bull market to resume. Daily technical indicators are turning bullish.

Blue Star

BlueStar_Aug15

The stock has been in a bull market since Mar ‘14. After a sharp rally to a closing high of 369 in Sep ‘14, the stock has been consolidating sideways within a ‘rectangle’ pattern. It recently tried to break out above the ‘rectangle’ with decent volume support and closed at a 2 years high of 378, but the break out hasn’t been a convincing one yet.

Daily technical indicators are bullish but looking overbought and showing some negative divergence. Expect the stock to consolidate some more before resuming its up move.

Hawkins Cookers

Hawkins_Aug15 

All good things eventually come to an end. The stock price of Hawkins is no exception. After a stellar bull rally to a closing high of 4598 in Jan ‘15, the stock plummeted by more than 50% to a low of 2106 in Jun ‘15. Daily technical indicators are bearish and looking oversold.

The stock may test and even break the 2100 level. Any upward bounce from the 2100 level – if supported by strong volumes – will form a ‘double bottom’ reversal pattern. Sharp volume spikes on down days indicate bears are unlikely to give up control.

Symphony

Symphony_Aug15 

This stock was also in a relentless one-way bull run till it reached a 2 years high of 3151 in Apr ‘15. All four technical indicators were in overbought zones and three of them – ROC, RSI, Slow stochastic – showed negative divergences by failing to touch a new high.

That provided bears with the right incentive to attack. The stock appears to have formed a ‘double bottom’ reversal pattern at 1720 (after correcting 45% from the top). A feeble attempt was made to cross above the blue down trend line. More downside is possible.

Titan Industries

Titan_Aug15

Titan was a darling of the stock market because of RaRe bull’s presence. After closing at 442 in Jan ‘15 and correcting down to its 20 day EMA, the stock rose to a lower top of 435 a month later – forming a ‘double top’ reversal pattern.

That was the trigger for a correction, which is still in progress. The stock has dropped below all three EMAs into a bear market. Daily technical indicators have corrected oversold conditions. Some more correction is likely.

Videocon

Videocon_Aug15 

The stock has been in a bear market for the past 2 years. Several attempts to escape from bear territory have been inevitably followed by heavy selling.

Daily technical indicators are looking bearish and oversold. This stock is best avoided.

VIP Industries

VIP_Aug15

The stock has tested the patience of long-term investors. After closing at a 2 years high of 126 in Jan ‘15, the stock price dropped to 90 in Mar ‘15. It has been moving sideways below its 200 day EMA in a small range since then, and is technically in a bear market.

Three of the technical indicators are in neutral zones. Slow stochastic is inside its oversold zone. Check Q1 (Jun ‘15) results before initiating any action.

Whirlpool

Whirlpool_Aug15 

The stock has been in a bull market since Feb ‘14, but its upward momentum has slowed down considerably since Jan ‘15. However, it continues to touch higher tops and higher bottoms – which is a sign that bulls are in control.

Stay invested with a trailing stop-loss.

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