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Thursday, May 15, 2014

Stocks in the news this week (May 15, ‘14)

The great ‘event’ will finally happen tomorrow (May 16) – announcement of results after the protracted general elections. TV and print media had a field day in covering and analysing the elections and the likely results in an effort to grab ‘eyeballs’.

More important news have been ignored. The IIP number was –0.5% – another month of negative industrial production, but an improvement over the previous month. CPI inflation moved up – thanks to higher vegetable and fruit prices. WPI inflation eased a bit. The new government will have their work cut out.

Companies are in the midst of announcing quarterly and annual results. Their stocks are reacting accordingly – as the charts below will show. Make sure you understand what these companies do, and who they do it to, before deciding to buy or sell.

Ahmednagar Forgings

AhmednagarForg_May1514 

The stock of Ahmednagar Forgings had formed a ‘double-top’ reversal pattern during Mar-Apr ‘12 (not shown) and slipped into a bear market – dropping from a high of 197.50 to a low of 73.20 in Aug ‘13. It has been rallying since then and had already re-entered a bull market and doubled from its low when news of good quarterly results hit the market – causing a gap-up move on a volume spurt. Technical indicators are looking overbought. The stock may undergo a bit of correction or consolidation.

BHEL

BHEL_May1514

Infrastructure company stocks in general, and BHEL in particular, have been suffering terribly in long bear markets. BHEL’s stock finally bottomed out at 100 in Aug ‘13. It has managed to return to a bull market and doubled in value from its low. The recent price spurt was on rumours of a stake sale. Technical indicators are looking overbought. Expect some correction or consolidation.

Dr Reddy’s

DrReddys_May1514

The stock of Dr Reddy’s has been in a long bull market and touched a high of 2940 in Feb ‘14. It went into a corrective mode for 2 months before recovering to touch a lower top of 2783 on Apr 30 ‘14. After consolidating sideways for a few days, the stock price crashed on huge volumes after announcement of disappointing Q4 results. Technical indicators are looking bearish and a bit oversold. (Question for SEBI: Was there insider selling before result announcement?)

LG Balkrishnan

LGBalkrishnan_May1514

After touching a high of 338.50 in Apr ‘12 (not shown), the stock of LG Balkrishnan dropped into a bear market that bottomed out at a low of 152 in Aug ‘13. The stock rallied spectacularly since then – first returning to a bull market in Nov ‘13 and then moving up to triple in value from its low. Today’s price spurt on strong volumes was due to announcement of good results and a liberal 1:1 bonus issue. Technical indicators are looking overbought and showing negative divergences by failing to touch new highs. The stock is likely to move higher after a bit of consolidation.

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