On Friday April 24 1998, the BSE Sensex closed at 4050.98 points. As compared to the close of the previous week the index lost a 137 points. The fall in the index values came as a shock to many of the market participants who still expected that the index would continue to still move upwards. The fall from a weekly high was particularly severe as the index fell after making a weekly high of 4322 points. Several stocks which were attracting only buyers suddenly were attracting only sellers. It has always been our endeavour to give our readers uninfluenced and unadulterated advice in picking up stocks which have the potential to appreciate.Anyone who has been seriously following the recommendations made in this column would have benefited immensely. The recommendations made in this column over last 10-14 weeks have all performed magnificently. We have been able to identify some of the stocks which have not only shown sufficient appreciation in price, but many of them have indeed been among the top performersin the market. Some of the recommended stocks like Sterlite, ABB, Videocon International, Finolex Cables and many more have seen more than a 100 per cent rise within a span of weeks. There have been occasional failures but these have been rare. But is there any system in the stock selection process which will give cent per cent results ?.
Occasional failures are unavoidable and are very much a part of the game. It is for this reason that we give stop loss levels. We will continue to make recommendations in this column and hope to locate, for the benefit of our readers, some more profitable investment and trading opportunities.Last week, we had warned that the market was on the verge of reversal and investors at this juncture should look to book profits. There were several bearish candlestick patterns that formed over last several weeks which compelled us to assume that the market had run its full course. On the April 8 and April 10 the market formed bearish ' two crows' pattern . This was followed byappearance of a 'dark cloud cover' on April 16.
On April 20, a 'shooting star' appeared. The final nail in the coffin appeared with the appearance of the very bearish ' engulfing pattern.' during the week. On the weekly charts ( not shown here) the index has formed a bearish `engulfing pattern. Such a confluence of bearish patterns does suggest that the market is due for a strong reversal. The supporting indicators have also given sell signals. The MACD (Moving Averages Convergence Divergence) is in a sell mode. The 14-day RSI (Relative Strength Index) has shown a sharp rise from its head and shoulder pattern. On Friday, the index formed a 'hammer'; this is a bullish pattern. What is expected is that market may stage a sharp rally to around 4175 points in one or more sessions before going under. Investors are cautioned not to get caught on the wrong foot and not to expect the market to continue this uptrend.
Kakatia Cement: Strong momentum seen
Like several stocks this one has also shown abreakout from its long term basing pattern. The breakout has been with an appreciable increase in volumes. The 12-week ROC (Rate Of Change) shows a very strong momentum. The stock does have the potential to rise to around Rs 60. One may consider investing in this stock at current levels. Keep a stop loss level below Rs 22.
Bausch & Lomb: Await breakout
The most impressive thing about this stock is the pick up in volumes over last couple of weeks. This stock is just around its 1994 high. Once the level of around Rs 110 is surpassed this stock could virtually zoom up. Investors may await breakout before entering in to this stock. Keep a stop loss level below Rs 95.
Dhampur Sugar: Worth buying
This stock has come out with some impressive results and this could fuel bullishness in the stock price. The stock has shown a breakout from its falling trendline accompanied by an impressive increase in volumes. The weekly MACD is in a buy mode. One may consider buying this stock at currentlevels. Keep a stop loss level below Rs 88.
Castrol: Enter long
This stock is just above its support level of Rs 688. Traders may consider buying this stock at current levels and consider exiting at around Rs 715. Keep a stop loss level below Rs 683. State Bank: may rise This stock has formed the bullish engulfing pattern. The stock could rise to around Rs 305. Enter long Keep a stop loss level below Rs 290.
Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.
