Friday, December 18, 2015

Stock Chart Pattern - Indian Hotel (An Update)

Fundamentally, the company is still struggling to come out of the woods. Mistimed acquisitions - overseas and in India - at the height of the previous bull market had left the company with a huge debt burden.

A global economic downturn followed by the terrorist attack in Mumbai severely curtailed visits by foreign tourists, and put paid to any near term chance of a revival. Overcapacity in the Indian market didn't help matters.

The lower-end Ginger brand hasn't been successful. A change at the helm and efforts to restructure and consolidate operations seem to be slowly bearing fruit.

Technically, the daily bar chart pattern of Indian Hotel shows that the worst may be getting over. The stock had touched a low of 37.55 on Aug 6 '13. The subsequent rally took the stock to a high of 127.25 on Dec 5 '14 - a huge gain of 240% in 16 months.

The stock touched slightly lower tops of 126.85 on Jan 2 '15 and 126.95 on Feb 5 '15 - forming a 'triple top' reversal pattern in the process. A 7 months long correction ensued, and the stock slid below its three EMAs into bear territory.

The stock price touched a low of 80.75 on Sep 7 '15 - testing the long-term support-resistance level of 80 - and retracing 51% of its entire rise from the low of Aug '13 to the high of Dec '14. Since a 50% Fibonacci retracement often marks the end of a bear phase, it was no surprise that the stock has been on an up trend for the past three months.

By convincingly crossing above its three EMAs with a volume surge on Dec 2 '15, the stock has re-entered bull territory. The 'golden cross' of the 50 day EMA above the 200 day EMA has technically confirmed a bull market.

Three of the four daily technical indicators - MACD, RSI, Slow stochastic - are looking overbought. ROC has corrected sharply from its overbought zone. The stock is undergoing a sideways consolidation - after which it may move up to touch a new high.

This may be a good time to start accumulating the stock.

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