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Friday, April 28, 2017

Technical updates – Thermax and Voltas

There has been considerable change in the fortunes of Thermax and Voltas since the previous technical update.

Slow economic growth and poor credit off-take had taken a toll on the capital goods sector. Just when things were beginning to look up, demonetisation of Rs 500 and Rs 1000 notes put a spanner in the works.

Notwithstanding strong protests and predictions of dire consequences by opposition parties, economic recovery from demonetisation has been surprisingly better than expected. The effect is clearly visible on the charts of Thermax and Voltas.

Thermax


The stock had hit a high of 1294 in Mar '15 but daily technical indicators formed various reversal patterns inside their overbought zones. That triggered a long bear phase that touched a low of 707 in May '16.

A technical bounce into bull territory was followed by formation of a 'double top' reversal pattern and a correction below all three EMAs. The stock touched a higher bottom of 742 in Jan '17 - forming a 'double bottom' reversal pattern that has propelled the stock back into bull territory.

Daily technical indicators are correcting overbought conditions. The dip can be used to add.

Voltas


After undergoing a strong corrective move from a high of 358 in Jun '15 to a low of 222 in Feb '16, the stock formed an 'inverse head and shoulder' like pattern that triggered a strong bull rally.

The stock rose to touch a high of 402 in Oct '16, but all four technical indicators touched lower tops. The combined negative divergences led to a sharp correction below all three EMAs to a low of 293.

Oversold technical indicators signalled the beginning of another strong rally that took the stock to a new high of 419 on Apr 20 '17.

The stock is in a strong bull grip despite periodic sharp corrections. Dips can be used to add.

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