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Analysis of select India stocks (short term perspective)


In this article let us review some stocks which are technically bullish for the short term. As I have mentioned
in my earlier articles these stocks are selected either from A category or B1 category of BSE (Bombay Stock
Exchange). This helps in eliminating illiquid stocks, those with listing related issues etc.

Arvind Mills Limited:

This is a very popular, fundamentally good textile stock. It has a P/E ratio of 40 and book value of 70. During
the financial year 2006 – 07 the company has reported a net profit of Rs.121.34 crores. But what has
happened in the last few years to the stock price? Let’s see the price chart below.

The weekly chart displayed above indicates clearly that the stock has fallen from its resistance zones at
148.30 (September 2005) to 41.80 in April 2007. How do we compare the financials for 2006 – 2007 and the
stock price then? On March 31, 2006 the stock price was 100.50. Exactly a year later it was 43.45.

I have been writing in my earlier articles that the stock prices always discount other criteria. A good profit
making company, with strong fundamentals, has not attracted the investors for more than a year. This is
where technical analysis outscores fundamental analysis.

For the short term, watch the daily chart. We can see the strong consolidation between April and July this
year. The low made by the stock on April 2 has remained intact. The resistance at 49.20 has been broken on
July 10 with volumes. The “dark cloud cover” candlestick pattern on July 5 has been nullified by a green
candle on July 6.

Moving ahead, the stock is expected to continue its uptrend. The next resistances for the stock are at 63.25
and 72.70.

Gujarat Narmada Valley Fertilizers Company Limited:

The company’s manufacturing facilities at Bharuch, Gujarat produce fertilizers such as urea, ammonium
nitrate, ammonium phosphate, diammonium phosphate, miurate of potash and chemicals such as methanol,
acetic acid, formic acid, nitric acid and ammonium nitrate. The company has the world’s largest single stream
fuel oil based ammonia - urea plant. It is also India's only producer of glacial acetic acid through cutting edge
methanol route. The company reported a net profit of Rs. 326.47 crores in the financial year 2006 – 07.

In the stock market, the stock has really struggled for more than a year. It fell from its previous high of
144.95 in May 2006 to 78.50 in June 2006. It didn’t pierce its resistance at 116.90 until yesterday (July 11).
Watch the “cup and handle” breakout chart pattern. We have discussed about this for polyplex corporation in
my previous article, “5 India Stocks You Need to Own Now”.

The cup and handle pattern has taken about 6 months time, as can be seen in the chart. The stock is expected
to test its previous high of 144.95. The stock is also bullish on long term (monthly charts).

Power Finance Corporation Limited:

PFC provides financial products and services like project term loan, lease financing, direct discounting of
bills, short term loan etc. for various power projects in generation, transmission, distribution sectors as well
as for renovation and modernisation of existing power projects.
The stock has been in consistent uptrend since April this year. Yesterday its previous resistance at 166.80 has
been broken. The stock has completed one full elliot wave cycle; it is in the first wave of a fresh cycle. Any
correction/decline in the stock is a good opportunity for entering the stock. Next targets for the stock are 193
and 209.

Parsvnath Developers Limited:

This stock is one of the constituents of the recently introduced BSE Realty Index.
The New delhi based real estate company has presence in 46 cities and 17 states across the country. The
company has a diversified portfolio with projects varying from residential complexes to
commercial/shopping centers, multiplexes, from metro malls at Delhi Metro Rail Corporation stations to
Hotels and IT Parks, and integrated townships. The company has approvals for 12 Special Economic Zones
from the Ministry of Commerce, which have financial outlay of Rs. 37,500 crore in next 5 years. The
company reported a net profit of Rs.292.21 crores for the financial year 2006 – 2007 with diluted EPS of

Technically, the stock has consolidated from April 25 to July 2 this year. It is currently in its fifth wave. A two
month consolidation pattern can be seen in the chart below.

The first wave, was very small; the second wave almost tested its previous low. The third wave wasn’t
lengthy either. The stock has formed a near “triple bottom” as shown above. It has broken out on July 3 with
volums. Once again it has started its uptrend after correcting for a couple of days.
The next target for the stock works out to 440 which is 61.8% retracement from a low of 221.10.

Tata Metaliks Limited:

Tata Metaliks is engaged in the business of manufacturing pig iron. Its plants are located at Kharagpur (West
Bengal) and Redi (Maharashtra). The company provides its customers with critical support across their entire
business cycle viz. raw material, process and end products. The company reported a net profit of Rs.29.51
crores for the financial year 2006 – 07 with EPS of 11.67.

This stock has also been in consolidation since April. It has broken its resistance at 136.95 on July 11. Like
the Parsvnath, this has also completed one full elliot wave cycle and currently on its first wave. Corrective
declines may be used to enter this stock. The next resistances for the stock are at 158 and 173.95.