Research Desk Stock Broking

Transcription

1 Research Desk Stock Broking India ValueMax February 01, 2015 ValueMax Monthly Investment Ideas ValueMax helps clients to take a long stance on stocks from the S&P BSE-100 universe. Comprising monthly technical investment ideas, ValueMax will have up to 10 stock recommendations, which will be issued at the beginning of every month. The selection and recommendation criteria will be based on technical analysis. ValueMax will be made available to the dealers and relationship managers through GotX and Karvy Mail. A brief technical report on the ideas will also be released, justifying our view on the stocks and the reason for the selection. The report will also be uploaded on IRIS & Karvy online websites. Book profit/exit messages will be communicated during the LIVE market on GotX (trading terminal) under the head ValueMax. Please find the ValueMax investment ideas for February ACC Cements Buy BHEL Capital Goods Buy Cipla Pharma Buy Coal India Mining Buy ICICI Bank Banking Buy Maruti Auto Buy ONGC Oil and Gas Buy Power Grid Power Buy Tata Chemicals Agri Chemicals Buy Wipro Software Buy CMP: Current Market Price; SL: Stop Loss; TGT: Target Note: All charts are sourced from Spider Software. 1

2 ACC Cements Buy day EMA day EMA day EMA ACC has been in a structural uptrend making higher highs and higher lows on daily charts. From the recent swing low of Rs levels to its fresh all time high of Rs , the stock has been constantly moving higher and has been one of the outperformer in the Cement space continuously breaching its previous all time highs on the regular basis. The stock made a fresh life time high of Rs.1595 levels during the last month, after which it has witnessed a round of profit booking which has dragged the stock lower, where the counter took support at its 20 day EMA. Technically, on weekly charts the stock was forming Descending Triangle and had given breakout from the said pattern in mid of the month with notable volumes. This confirms that the stock has formed a base and is all set to start its next up move towards our target levels in the uncharted territory on the up side. The stock is also trading above all of its major short and long term moving averages with technical indicator 14 day RSI showing reading in the comfortable zone, clearly indicating the bullish trend is likely to remain intact in the counter. The stock is also trading above its previous top of Rs levels clearly suggesting that the stock is witnessing good accumulation on any throwback towards the support levels. Among the other indicators, Bollinger bands also widening and showing buying interest of participants and price is also trading above its mean. The current momentum suggests that the stock is likely to surpass its upper band. Our take: Considering the above mentioned facts, we recommend short term traders to buy the stock at the current levels for the potential targets of Rs.1685 to 1720 over the next one month. While, any dip towards the Rs.1520 mark can be utilized to average the stock, with a strict stop loss placed below Rs.1480 levels. 2

3 BHEL Capital Goods Buy day EMA day EMA day EMA BHEL mopped up gains of just about 10% outperforming the broader markets by a fair margin on a monthly basis. In the past, the stock rallied from a multiyear low of Rs in September 2013 to Rs in May It retraced by 50% from those levels to a low of Rs in October 2014 and again rallied to Rs in last week of January, 2015 surpassing it s previous 52 week high of Rs This indicates the stock is in strong up trend and can rally further from here on. On daily charts the stock is making cycles of higher highs and higher lows clearly indicating that every time there is a throwback in the price of the stock, aggressive traders are assuming long positions in it for higher levels in the day sot come. On the weekly charts the stock is making attempts to hug the upper end of the Bollinger band and move higher laon g it. The widening of the band indicates the positive momentum in the stock can continue over an extended period of time. A Similar pattern has been observed on daily charts as well. Among the indicators, parabolic SAR (Stop & Reverse) is trading below the price, suggesting buying will remain intact with the counter in near term while, while the 14 period RSI on daily charts is at with the 9 period Average RSI pegged at levels. Our take: The recent price action suggests the momentum in the stock to continue in the month of February as well ahead of the budget. Thus, we recommend buying the stock on declines towards Rs.280 for targets of Rs.310 and Rs.323 levels with a stop loss placed below Rs.276 levels. 3

4 Cipla Pharma Buy day EMA day EMA day EMA Cipla has given a symmetric triangle breakout around 660 levels on weekly chart with significant volume and closed the month above the said levels near life time high. Prior to that, the stock remained in the above said triangle for almost three months, testing the highs and lows for the three time. The stock outperformed CNX Pharma significantly last week and closed the week with the gain of 2.67% where CNX Pharma has generated 0.97% return in the last week. The stock has seen in increase in price with increase in deliverable quantity to trade quantity soon after the symmetric triangle breakout suggests the strong hands are accumulating the stock at upper levels. The stock is sustaining above its medium and long term moving averages during the last few weeks and is taking support around its short term moving averages indicating the strength in the uptrend and thus any correction towards short term moving averages will be better levels to enter into the stock. The recent price action has seen volatility burst on Bollinger Band on daily chart and currently the stock is trading above upper band of Bollinger band, which suggests that volatility to increase in the stock on upside rally. On the technical setup, 14-period RSI has seen positive crossover with signal line on weekly charts suggests inherent strength in the counter and any decline in the stock can be used for fresh long accumulation in near term. Our take: The symmetrical triangle breakout has given fresh trigger in the stock and the momentum is expected to push the stock high towards 750 to 765 levels in the near term. We suggesting buy in the stock for the target of levels keeping stop loss of 660 levels on closing basis. 4

5 Coal India Mining Buy day EMA day EMA day EMA With a stable government at the Centre, Coal India is likely to be a key beneficiary of reforms. The stock s offer for sale also got over subscribed by 1.1 times making it one of the largest successful open offers in India. Post offer the free float is going to be increased, which will also impact the weightages on various indices. This provides a good opportunity for investors to invest in the world s largest coal mining company. Technically the stock after having rallied from the lows of sub Rs 240 to Rs. 424, the stock has been consolidating in the range of Rs 330 to Rs 424 over last 7 months. The Fibonacci Retracement plotted from a low of Rs.240 to a high of Rs.424 on monthly charts, suggests that the stock is holding well above its 50% retracement of said up move, which is a positive sign in itself The stock is currently flirting with its medium term and long term simple moving averages which the stock has respected during earlier corrections. Among the oscillators, the RSI is hovering around the 51 odd levels, and any upward move above the levels in the coming trading session will provide the positive synergy to the stock. MACD line is also trading in the positive territory above the central line, indicating positive sentiments in the stock. Our take: The stock is expected to take support and rebound from current levels towards the mentioned target levels. Any minor corrections should be used as a buying opportunity for optimum returns. We also expect the stock to retest its life time high in the coming months and any break-out of the same could push the stock to unchartered territory. 5

6 ICICI Bank Banking Buy day EMA day EMA day EMA On a monthly basis, ICICI Bank, India s leading private sector bank, managed to end just marginally higher by 2.15% after it made a higher high and a higher low on monthly charts. The stock however, witnessed some selling pressure after it posted its Q3 numbers on 30 th January, This selloff has provided traders with an excellent opportunity to accumulate the stock with a short to medium term perspective as the stock has retraced just about 61.8% of its entire up move from the recent swing low of Rs.333 to its all time high of Rs The stock is trading above all major moving averages with the 50 day SMA at Rs and the 200 day SMA at Rs clearly indicating that the stock is in a secular primary uptrend. The ADX which is currently pegged at has bettered from in the previous week, on weekly charts. This suggests that the recent selloff in the stock on account of missing the street estimates in Q3 hasn t impacted the overall structure of the stock s upward cyclic movement. We recommend short term traders to buy the stock at current levels and also use dips towards Rs.350 to average the stock for potential upside targets of Rs in the next one month with a stop loss placed below the level of Rs.335. Our take: On a monthly basis, ICICI Bank, India s leading private sector bank, managed to end just marginally higher by 2.15% after it made a higher high and a higher low on monthly charts. The stock however, witnessed some selling pressure after it posted its Q3 numbers on 30 th January,

7 Maruti Auto Buy day EMA day EMA day EMA Maruti has outperformed CNX Auto index during the last month and generated a return of 9.54% as compared to CNX Auto which gained 7.84% during the same period. The stock has given a breakout from 3450 levels and is making higher tops and higher lows on daily charts. During the past week, the stock has retraced 23.60% of it retracement levels drawn from the low of Rs to a high of Rs levels, giving a comfort level for buying at current levels. On the weekly charts, the stock is forming Bullish RISING CHANNEL pattern and is trading at the lower end of the band with ~2x of normal volumes, which confirms that the stock has formed a base and is all set to start its next up move towards the uncharted territory on the higher side towards Rs levels in the coming session. On the daily charts, the stock is trading above all major short term and long term moving averages, indicating the bullish sentiment in the counter. Among the oscillators, the 14-week RSI at is showing strength and trading above the signal line at 78.07, indicating that the bullish sentiment is likely to remain intact in the counter. Among the other indicators, the Bollinger band plotted on daily charts suggests that the stock is hugging the upper band and is likely to continue with the same sentiment as it is widening and the price is also trading above its mean. The current momentum in the stock suggests that it is likely to move higher towards the target levels once it crosses the lifetime high of Rs Our take: Taking the above the data facts in to the consideration, we recommend short term traders to enter the stock at the current levels for the potential targets of Rs.3900 to 3950 levels during the month of February Any dip towards the Rs.3570 levels must be utilized to average the stock, with a strict stop loss placed below Rs.3490 levels. 7

8 ONGC Oil & Gas Buy day EMA day EMA day EMA ONGC dominates India s Oil & Gas production with more than two-third share of country s production of oil and oil equivalent gas. A sharp fall in subsidy burden will ensure that ONGC s post-subsidy net realization will increase substantially, and it is also likely to benefit from LPG reforms as well. The stock price after posting a high of 438 levels in the month of Sept 14 drifted lower towards 327 levels; in last one and half months stock has formed base above 327 levels and trading with mixed to sideways bias. Technically speaking, stock has witnessed rally from the lows 210 levels to 445 levels, post which it entered into a phase of correction, wherein it has retraced 62% of the said rally and forming base above Golden Ratio, which indicates accumulation after a healthy technical correction and should be bought in. Currently stock price is holding on a brink of its 21-DEMA, and hovering below its 50 & 200-DEMA which is placed in close vicinity of each other near 357 levels, once prices manages to surpass and sustain above this average, renewed buying interest can be seen in the counter. Momentum oscillator 14-period RSI on weekly chart after testing oversold territory hovering above 40-levels, and historically after testing oversold territory, initially RSI has formed base, post which smart recovery in prices can be seen. Also, MACD (12/26/9) has given Bullish Crossover in Bearish territory and recently managed to move above trigger line, signifies that bullish momentum is picking up on a gradual note. Our take: The stock is forming a firm base, which provides an ideal opportunity to accumulate stock at current levels, as bullish momentum is picking up, indicates prices are likely to surge higher in coming weeks. Therefore we recommend buying stock at current levels and if any dip towards 335 levels should be utilized to average the stock, for an initial target of 385 levels and 400 levels, keeping stop loss below 325 levels. 8

9 Power Grid Power Buy day EMA day EMA day EMA The stock has given a consolidation range breakout during the last month and has made a 7-year high of Rs On the daily charts, the stock is trading above the short term and long term EMAs indicating the bullish sentiment in the counter and multiple supports at lower levels. Currently the stock is consolidating after its break out of the upper Bollinger band and forming a base around the 8-day EMA which is pegged at Rs The middle band is trading around Rs which shall act as immediate support for the stock to accumulate more at lower levels. The average delivery volumes of daily traded quantity have increased by 4%from 54.85% in December, 2014 to 58.9% in January, Among the oscillators, the 14-day RSI with a reading of has taken a dip from the overbought territory, giving us a comfort to enter at current levels and also accumulate on dips to support levels. Also, the MACD is trading in the positive territory with a reading of 6.74 as compared to signal line at Our take: The stock is making higher tops and higher bottoms on the monthly chart and can extend the up move towards the aforementioned levels in the near term. 9

10 Tata Chemicals Agri Chemicals Buy day EMA day EMA day EMA TATACHEM has ended the month of January, 2015 at its lifetime closing high of Rs with remarkable deliverable volumes, clearly suggesting the overwhelming demand for the stock at even higher levels. This enhances our positive stance on the stock as it can move towards our target levels sooner, once the Rs mark is taken out on a closing basis. The overall chart structure of the stock suggests formation of higher tops and higher bottoms on the monthly timeframe, clearly indicating that the stock is in a secular uptrend, ever since it began its up move from a low of Rs to its recent all time high level of Rs Buying activity along the stock s upward movement has been phenomenal and the stock can witness more accumulation as it moves higher. The stock is trading above all major moving averages like the 50 day SMA at Rs , 200 day SMA at Rs and also above its very short term 5 day SMA at Rs , which is a positive sign in itself. Apart from that, it is clearly evident that whenever the stock is witnessing any throwback, buying activity is getting intensified suggesting good demand at lower levels too. Among indicators, on weekly charts, the 14 period RSI is currently at 68.50, well above the 9 period Average RSI which is pegged at levels. On the other hand, the ADX on the daily charts suggests that the current upswing in the stock is gathering momentum as it has now started pointing skywards, indicating that the strength of the current uptrend is likely to pick up pace which would enable the stock to achieve the mentioned target levels within the stipulated timeframe. Our take: We feel that this stock from the Agri space can be an outperformer as it is trading in its lifetime high territory. We also recommend short term investors to accumulate the stock on dips towards Rs.442 with a strict stop loss placed below the level of Rs.429, for potential upside projected target levels of Rs.509 and Rs.515 respectively 10

11 Wipro Software Services Buy day EMA day EMA day EMA Wipro gained as much as 9.25% during the last month with robust volumes. During the month, the stock witnessed a Gap up opening soon after the announcement of the Q3 numbers which beat the street s estimates, taking the stock towards its new lifetime monthly closing high of Rs The Gap up levels (Rs Rs ) shall act as immediate support for the stock in the near term. On the monthly charts, the stock is in a secular uptrend and the positive sentiment is likely to continue over the next few weeks. The stock crossing its all time intraday high of Rs can shoot towards Rs in the months to come. On the weekly charts, the stock is trading comfortably above the 13-week EMA which is trading at Rs and shall act as near term support for the stock. The average deliverable quantity has picked up in the last few trading sessions, indicating the vivid interest amongst the market participants for the stock from an investment perspective. This shall act as a positive trigger for the stock in the near term as well. Amongst the Oscillators, the 14-week RSI with a reading of is trading above the 9-day EMA signal line at 54.18, pointing northwards. The MACD line is trading in the positive territory on the daily charts with a reading of above the Signal line at Our take: The counter is expected to continue its uptrend from current levels and can witness a fresh round of intense buying above Rs , which can push the counter towards aforementioned levels in the stipulated timeframe. Wipro being a defensive counter is our preferred pick from the IT space for this month s ValueMax. 11

12 KARVY RESEARCH DESK STOCK BROKING JK Jain Karvy Stock Broking Limited Karvy Centre, Avenue-4, 2nd Floor, Road No: 10, Banjara Hills, Hyderabad India. Tel: ; Fax: Disclaimer This document is solely for the personal information of the recipient, and must not be singularly used as the basis of any investment decision. Nothing in this document should be construed as investment or financial advice. Each recipient of this document should make such investigations as they deem necessary to arrive at an independent evaluation of an investment in the securities of the companies referred to in this document (including the merits and risks involved), and should consult their own advisors to determine the merits and risks of such an investment. Karvy Stock Broking Limited, its affiliates, directors, its proprietary trading and investment businesses may, from time to time, make investment decisions that are inconsistent with or contradictory to the recommendations expressed herein. The views contained in this document are those of the analyst, and the company may or may not subscribe to all the views expressed within. Reports based on technical and derivative analysis center on studying charts of a stock's price movement, outstanding positions and trading volume, as opposed to focusing on a company's fundamentals and, as such, may not match with a report on a company's fundamentals. The information in this document has been printed on the basis of publicly available information, internal data and other reliable sources believed to be true, but we do not represent that it is accurate or complete and it should not be relied on as such, as this document is for general guidance only. The information given in this document on tax if any are for guidance only, and should not be construed as tax advice. Investors are advised to consult their respective tax advisers to understand the specific tax incidence applicable to them. We also expect significant changes in the tax laws once the new Direct Tax Code is in force this could change the applicability and incidence of tax on investments. Karvy Stock Broking Limited or any of its affiliates/ group companies shall not be in any way responsible for any loss or damage that may arise to any person from any inadvertent error in the information contained in this report. Karvy Stock Broking Limited has not independently verified all the information contained within this document. Accordingly, Karvy Stock Broking Ltd cannot testify, nor make any representation or warranty, express or implied, to the accuracy, contents or data contained within this document. While Karvy Stock Broking Limited endeavors to update on a reasonable basis the information discussed in this material, there may be regulatory, compliance, or other reasons that prevent us from doing so. This document is being supplied to you solely for your information, and its contents, information or data may not be reproduced, redistributed or passed on, directly or indirectly. Karvy Stock Broking Limited and its affiliates may seek to provide or have engaged in providing corporate finance, investment banking or other advisory services in a merger or specific transaction to the companies referred to in this report, as on the date of this report or in the past. Neither Karvy Stock Broking Limited, nor its directors, employees or affiliates shall be liable for any loss or damage that may arise from or in connection with the use of this information. 12