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Friday, June 9, 2017

Technical updates – Maharashtra Seamless and Ratnamani Metals

The global economic slowdown - particularly in China - had severely affected the metals sector. Prices plummeted due to lower demand. Stocks of steel and aluminium companies were hit hard. Stocks of metal pipes and tubes sector also suffered badly. 

But with the government beginning to open its purse strings for infrastructure projects and removing hurdles for stuck projects, things are beginning to look up for the metals sector.

The 3 year closing charts of Maharashtra Seamless and Ratnamani Metals clearly show that all the losses during their respective bear phases have been recovered. Both stocks are poised to rise to new highs.

Maharashtra Seamless


The stock had closed at a high of 358 on Sep 9 '14, but formed a 'triple top' reversal pattern during Aug-Sep '14 that triggered a bear phase that lasted almost 18 months. 

The stock closed at a low of 132 on Feb 29 '16. Note that all four technical indicators showed positive divergences by touching higher lows inside their oversold zones.

A sharp price spike on Apr 4 '16 took the stock above its three EMAs into bull territory. The subsequent rally received good support from the 200 day EMA. The previous top of 358 was touched on Mar 6 '17, but the stock formed a 'double top' reversal pattern by touching 357 on Apr 5 '17.

A bull market correction/consolidation is under way. The company declared decent Q4 (Mar '17) numbers but for FY 16-17, top line and bottom line were lower by 17% and 5% respectively. Valuation looks a bit high.

Ratnamani Metals


The stock had closed at a high of 783 on Mar 3 '15 before dropping into a bear phase that ended almost a year later when the stock closed at a low of 404 on Feb 19 '16.

Oversold technical indicators and positive divergences on RSI and Slow stochastic triggered a rally that took the stock to a new high of 811 on May 3 '17. Disappointing Q4 (Mar '17) results led to a sharp sell off.

The stock dropped below its 20 day and 50 day EMAs to a low of 705 on May 23 '17. Oversold technical indicators have initiated a partial price recovery. For FY 16-17, top line grew by 17.5% and bottom line by 6.1%.

Valuation is on the expensive side. Another dip towards the 200 day EMA may provide a better entry opportunity.

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