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

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

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

 

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

 

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 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

 

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

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

 

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.

When will stocks in the Consumer Durables sector revive?

The slowdown in the Indian economy has taken its toll on stocks from the Consumer Durables sector. But the revival process seems to have started.

However, as in every other sector, some stocks are performing better and some stocks are performing worse than the rest. Many small investors fall into the trap of buying stocks that appear ‘cheap’, because the ‘good’ stocks seem too expensive.

But ‘cheap’ stocks often become cheaper, and good stocks become even more expensive when the sector starts to flourish.

Bajaj Electricals

From a peak of 347 touched in Oct ‘10, the stock dropped 61.7% to a low of 133 in Dec ‘12. The subsequent revival has not yet retraced 50% of the fall. The stock is struggling to stay above its 200 day EMA. Can be considered for entry only on a convincing move above 240.

Blue Star

Blue Star had touched a peak of 554 in Sep ‘10, before losing a huge 73% to touch a low of 151 in Dec ‘11. The bears are yet to release their tight grip, as the stock struggles to stay above its 200 day EMA. Avoid.

Gitanjali Gems

The stock has made a bullish ‘rounding bottom’ pattern and is back in a bull market. However, all four technical indicators are showing negative divergences by failing to touch higher tops. The likely dip can be used to add.

Rajesh Exports

The stock has been in a down trend for the past 6 months, and has slipped below its falling 200 day EMA. A fall below the blue uptrend line will be quite bearish. The stock has wild price swings – which may be good for trading, but not for investment. Avoid.

Titan Industries

Despite the number of shares multiplying by 20 times due to a 1:1 bonus and a 10:1 stock split, there seems to be no slow down in the upward momentum of Titan’s stock. This was the recommendation in the previous post: “Whenever you have a little spare cash, buy a few Titan shares – instead of trying to find the next mythical multibagger.” There is no reason to change the recommendation.

Videocon

The bear phase in the stock started after it touched a peak of 295 in Oct ‘10. Though the stock price appears to be moving sideways, the bear phase is still intact. Avoid.

VIP Industries

Once a darling of the stock market, and well-promoted by two of the major players (RJ and RD), VIP has hit skid row after its 5:1 stock split in Nov ‘11. Stay away.

Whirlpool

Whirlpool’s stock is in an uptrend from the beginning of the year. The price is consolidating within a rectangular band between 240 and 272, and currently seeking support from the uptrend line. Hold, with a stop-loss at 232. Add only on a convincing break above 272.

Which are the good stocks in the Consumer Durables sector?

The Consumer Durables index has been one of the better performers among the BSE Sectoral indices. That doesn’t mean all the stocks in the index are performing well. Some are struggling to get out of deep corrections. Some are in bear markets. Some have shrugged aside bear attacks and are in strong bull markets.

Just because a sector is performing well, it doesn’t make sense to buy several stocks from the sector. One has to pick and choose, and buy the best of the lot.

Bajaj Electricals

Bajaj Electricals started correcting from Oct ‘10, and dropped 45% from its peak of 347 to the Feb ‘11 low of 190. The subsequent rally broke above all three EMAs and the down trend line, pulled back to the 200 day EMA, and then rose to the resistance level of 296. It has slipped down to the support level of 266 and the rising 20 day EMA. The technical indicators are hinting at a further correction or consolidation. The stock seems to be completing a bullish cup-and-handle pattern. One can buy on a dip to the 50 day EMA or 200 day EMA, or on a break out above 296.

Blue Star

Blue Star’s correction started a month earlier – from Sep ‘10. The stock appears to have found a bottom and has broken above the down trend line, but has struggled to move above the 200 day EMA. It is technically in a bear market, and will remain so till it can break above its long-term moving average. Avoid.

Gitanjali Gems

Gitanjali Gems dropped a huge 60% from its peak of 395 in Nov ‘10 to 156 in Jan ‘11, and spent several trading sessions below its 200 day EMA but the ‘death cross’ confirmation of a bear market did not occur. The stock broke above its down trend line in Mar ‘11 and is technically back in a bull market. That means dips can be used to add.

Rajesh Exports

A very interesting technical pattern has developed in Rajesh Exports. It reached a top of 142 in Nov ‘10, and then a slightly higher top of 145 in Jan ‘11. This would have been treated as a bearish double-top. But note that the slightly higher second top was part of a head-and-shoulders reversal pattern, with its neckline at 129. The sharp sell-off may take the stock down to the 75-80 level, where it is expected to find some support. The stock also had a sharp correction during May-Jun ‘10. Such volatile stocks are best avoided.

Titan Industries

What can one say about a stock which has not only been the darling of the sector, but also of the entire stock market? Titan fell 30% to its 200 day EMA in Feb ‘11, but did not close below its long-term moving average even for a day. It stopped short of testing its top of 4244 touched in Nov ‘10. Negative divergences in all four technical indicators – which made lower tops while the stock moved higher – may cause a dip to the 50 day EMA. Whenever you have a little spare cash, buy a few Titan shares – instead of trying to find the next mythical multibagger.

Videocon

Any company that adds a ‘con’ in its own name probably won’t hesitate to con the investing public. Though Videocon has broken above the down trend line, it is trading below its falling 200 day EMA and remains in a bear market. Avoid.

VIP Industries

VIP Industries has given excellent returns to its shareholders and has been a star performer in the sector. Though the stock corrected 43% from its Oct ‘10 peak of 800, it spent only 2 days below the 200 day EMA before resuming its up move. Negative divergences in all four technical indicators have stalled the rally. The stock is in a bull market, and dips can be used to add.

Whirlpool

Whirlpool performed very well businesswise and stock price wise. But a rounding-top bearish pattern dropped the stock 40% from the peak of 337 (in Oct ‘10) to a trough of 200 (in Feb ‘11) – well below its 200 day EMA. A smart rally took the stock back into a bull market, where it made heavy weather of crossing its down trend line. A dip to the 50 day EMA or 200 day EMA can be an opportunity to add.