Saturday, August 29, 2009

Investment Review: Hold Videocon Industries

Past Recommendation: I had recommended a Buy Call on Videocon Industries Ltd on May 15, 2009- Click here to refer my old Blog post. The stock was recommended to buy in the range of Rs.95-125. Read Further Review on the Stock:

Significance of Trend Line Support

Charts Courtesy:

Alas !! A Breakout from Range Bound Movement:

1) Broadly Range Bound: In Rs.140-210 zone since mid-May 2009.
2) Narrowly Range Bound: In Rs.180-210 zone since mid-July 2009.
3) The stock has sought support for 3 times at the six month trend line during the month of March, Mid-May and Mid-July 2009.
4) Current Market Price: Rs.240/-

1) Starting the Journey: Whenever the stock has moved farther from the trend line by a substantial margin, sooner or later the stock has reverted back closer to the trend line to seek a support for any further upmove in future. The stock commenced its upmove during mid-March 2009 from its trough lows of Rs.75, the place from where the trend line's starting point can be tracked.

2) The Rising Baby: Since mid-March the stock rallied from Rs.75 to Rs.130 in about a month's time- a whooping range expansion from lows. This steep rally saw a consolidation pattern in the range of Rs.110-125. This consolidation was nothing but the stock reverting back to seek support near to its trend line's existence.

3) The Galloping Horse: Once seeking a support near to its trend line at Rs.110-125 zone during mid-May, the stock seemed ready for yet another bounce- this time even vigourous. This time the stock settled for nothing less than Rs.200 - another range expansion from Rs.125 to Rs.200. Not to mention over here that yet another round of consolidation was due and the stock reverted back to seek a trend line support at Rs.140/-.

Baby's Day Out:

If you must have closely observed, every range expansion is more vigourous than the last one. Once the stock reverted back to the trned line for support, the stock has moved to higher horizons with increased vigour. However, whatever be the extent of range expansion, the stock keeps coming back to trend line for support over a medium term horizon. Its like a child which goes out to play during the day, but has to come back at home during night hours to seek shelter at the end of the day.

What Next??

Since the stock has reverted back to trend line to seek support around Rs.140 zone during mid-July, the stock still seems to be reasonably near the trend line. However, closely analysing, the stock is neither near to the trend line nor too far away. I mean to say, the much sought after 'Range Expansion' may be still not complete on the stock's chart in whole- which could have been half done and still some more to come.

Conclusion: Hold Videocon with SL of Rs.190

My personal view is that we could see the stock reaching higher levels like Rs.260-280 zone during the ongoing momentum (even Rs.300 cant be ruled out), before we actually see the stock making effort to consolidate & seek its conventional support near to the trend line. This time the much needed trend line support zone could be perched in Rs.190-220 zone. But before that a likely range expansion could be in the row for this consumer durable stock.

Points to Note: As the stock moves up, its trend line support gradually shifts up in a slanting fashion. The trend line support mentioned in the charts around Rs.190 levels stands the test of time over medium term horizon. Later the levels can change depending upon the stock movement in future.

One another possibility that remains is- if markets correct sharply, the trend line could be breached on downside temporarily or even permanantly- which could be determined only with passage of time. The trend line supports could as well prove out to an illusion, if markets goes in a deep intermediate correction. Long term Investors can observe Rs.190 levels as Stop Loss for their investment in this stock based on the above mentioned explanation of trend line indicators as technical support for Videocon Industries.

Special Notes:

1)Readers should not mix-up Trading & Investment Call on Videocon Industries, both of which are recommended by me on this blog. This particular post is directed at Long term Investors & not Traders.

2) The views contained in this post are from the view of Technical Charts of the stock. So, readers who believe in Investments from Fundamental perspective can ignore this post. The fundamentals of Videocon remains sound from long term perspective.

Disclaimer: All data, content and/or reports posted by Viral Rajnikant Dholakia on this site are only for information and educational purpose of visitor/readers of this blog. It does not constitute to be a recommendation/offer/advice to buy or sell assets/securities in any form. Individuals/organizations are requested to take an informed call by consulting their Financial Advisor before acting on any matter/data published on this blog. This blog does not warrant of any kind of accuracy, adequacy and completeness of data, ideas or thoughts published in it. This site and Viral Rajnikant Dholakia assumes no responsibility or liability or loss or damage of any kind/nature for your trading and investment decisions and its consequent results.

1 comment:

Shabu's said...

Superb!!!! Viral,

I am also monitoring this scrip by few months. My intentions strengthened by your views for this scrip. It will provide definite and considerable gain in short term as well long terms. Thanks a lot... Keep it up.