JINDAL SOUTH WEST HOLDINGS (CMP:2148)

RECOMMENDATION - BUY AT CMP
TARGET- 2900, TIME HORIZON-3 MONTHS, STOP-1845

RATIONALE :

The stock had been consolidating in a range of 1600 to 2100 for almost 1 year. This range was conclusively broken recently with a remarkable increase in turnover.

During this consolidation, the stock consistently maintained above the 200 dma signaling the innate long term strength.

The consolidation which constituted wave 2 just retraced about 25% of the rally from March09 lows. Such resilience after sharp rallies auger well for the medium to long term trend.

The risk/reward ratio is fairly favorable buying at the current market price. The downside seems to be restricted to 5-8% whereas immediate upside can be in excess of 30%.

The table above shows the investments of the company in various equity/preference shares. The value of these investments are approximately 10% more than the market value of the company - However, this is a very conservative estimate as all unquoted shares have been taken at cost which is unrealistic to say the very least. The actual discount on the stock may easily be to the tune of 20-25%.

Buying a company where the value of embedded assets is much more than the market cap provides a lot of margin of safety.

Due to the reasons mentioned above, we feel that the stock is poised for decent upsides in the short to medium term.


Disclaimer : The recommendations mentioned herein are for educational purpose only. One should not take buy/sell decisions based on the above analysis which is prone to errors. The author does not undertake any liability whatsoever arising out of profits/losses accruing from using the above analysis.

Liberty Shoes (CMP:109) - Back in fashion

Liberty Shoes seem to be back in fashion in the stock market atleast.

RECOMMENDATION - BUY AT CMP OF 109
Trading Call
Target- 144, Time- t+14 days, Stop-102

Rationale :
Conventional Technicals : A breakout seems to have occured from a relatively rare 'Diamond' pattern with conspicuous increase in turnover at momentum.
Elliott Perspective : Wave 2 of the rally that began in March 09 seems to have ended around 90. Today's price action seems to confirm that we are well and truly on the wave 3.

Kindly note that this is a momentum based trading call and hence adherence to stops for capital protection is imperative.

Disclaimer : The recommendations mentioned herein are for educational purpose only. One should not take buy/sell decisions based on the above analysis which is prone to errors. The author does not undertake any liability whatsoever arising out of profits/losses accruing from using the above analysis.

Movies on Stock Markets - Must See!!

ROGUE TRADER

Released : 1999
Based on the book :Rogue Trader: 'How I Brought Down Barings Bank & Shook The Financial World'

Plot : Nick Leeson, the protagonist (or villain - depends the way you see it!!) has been portrayed as an ordinary clerk working for Barings Bank. His ambitions are not ordinary though. He wants to become the manager for stock market trading operations. Here is how the story unfolds-

The bank gives him an opportunity to sort out some issues at Jakarta. He seizes the opportunity with both hands. He meets Lisa whom he later marries. (Some obscene explicit scenes follow which were not at all required - They halt the story rather than taking it forward.)
Impressed by his success in Jakarta, the bank asks him to take charge of the trading operations in Singapore. However, he is not allowed to hire skilled staff as a cost cutting measure (Penny wise Millions of Pounds foolish... as it turned out). The bigger blunder was not to seperate the trading and backoffice department.
Nonetheless, the first year of operations were extremely profitable although he kept breaking the rules and covering losses. His performance though was so good prima facie that no one even raised a finger at him. He kept getting more and more money - but kept making bigger and bigger blunders - In his words, he was sitting on an volcano which was waiting to erupt.
Ultimately, his reckless trading operations resulted in bankruptcy of the bank - sold at a princely sum of 1 pound !!

Takeaways - The movie shows the greed factor in a very diligent yet explicit manner playing out in the stock market. Hazards of averaging a loss, arguing with the market, being greedy and hopeful etc in the markets have been portrayed remarkably -

A must watch for every stock market aspirant and veteran alike !!

GIC HOUSING (CMP:143) - TO PLAY CATCH UP IN STYLE

RECOMMENDATION - BUY AT CMP OF 143
TARGET - 178, STOP-132, TIME HORIZON -1 MONTH

Rationale -
Traditional Charting Perspective - The stock has exhibited a breakout from a consolidation (triangle) pattern with a distinct increase in turnover today. This pattern is likely to give strong tailwind to the stock in the short term.

Elliott Wave Count - The recent consolidation may be defined as wave 2 of wave 3 in Elliott nomenclature. The briefness of this wave 2 both in terms of amplitude and time speak volumes about the likelihood of a powerful wave 3.

Peer Group Action - The housing finance companies have been on a role lately led by LIC Housing. Others like Gruh Finance, DHFL have also been doing well.

Disclaimer : The recommendations mentioned herein are for educational purpose only. One should not take buy/sell decisions based on the above analysis which is prone to errors. The author does not undertake any liability whatsoever arising out of profits/losses accruing from using the above analysis.

CEAT (179) - An attractive investment

RECOMMENDATION - INVEST AGGRESSIVELY TARGET - 270, TIME HORIZON -6 MONTHS, STOP-160 Investors!! Just dont miss out this one.

RATIONALE :
Traditional Perspective : The stock had been trading in a wide band of 140-185 since Oct 2009. Interestingly, the earnings of the company have increased substantially during this consolidation. This earnings expansion is likely to provide virility to the breakout.
Off late, the rally from 140 odd was successful in breaking out of this range decisively. Since then the stock has been retracing, building steam for the next upmove. - A breakout with vigor and a pullback - Classical Buying Technique.

Elliott Perspective - The stock has is amidst wave 2 of wave 3 - refer diagram above. Once this wave 2 plays out, an explosive upmove in the form of wave 3 of 3 is on the cards.

Valuations are compelling - The stock is available at a trailing twelve month PE of 5.32 and a book value of less than 1 - Cheap by any stretch of imagination.

Proxy to the Auto Boom - Although the auto sector is doing well, the stock prices have run up considerably making valuations unattractive. But the same is not case with the tyre companies which are still trading below/around the highs seen in 08 at reasonable valuations.

Land Sale : The company intends to unlock value by selling 25 acres of land at Bhandup (approximate price of 500 crore). The sale proceeds are substantial considering the fact that CEAT has a market cap of about 600 crore. Hence, buying the stock means acquiring a tyre company with an annual turnover of approximately 3000 crore at just 100 crore.

A reasonably priced company with good prospects given the auto boom and excellent chart formation - What else can we ask for ??

UPDATE ON THIS RECOMMENDATION

Disclaimer : The recommendations mentioned herein are for educational purpose only. One should not take buy/sell decisions based on the above analysis which is prone to errors. The author does not undertake any liability whatsoever arising out of profits/losses accruing from using the above analysis.

APOLLO TYRES (CMP:81)

RECOMMENDATION : BUY AGGRESSIVELY AT CMP

HEADING FOR WAVE 3 OF 3 !!

TARGET- 98 (conservatively), Time Horizon - 1 month, Stop-74

Rationale :
Elliott Perspective : The recent rally from 59 odd to 88 was the 1st wave of 3rd wave that started in 08-09. Since then the stock has declined to 81 in a classical zig zag retracing 23.80%. With imminent signs of the ending of the 2nd wave, it may be prudent to start buying the stock anticipating the wave 3 of 3.

Traditional Perspective : The recent sideways move seems to have evolved into a flag pattern. This normally occurs half way through any rally. Hence it may not be unconceivable to see the stock fly away 30% in the short term.

Risk Management : Since strong waves very rarely retrace more than 61.80%, it may be prudent to observe a stop at 74.

Disclaimer : The recommendations mentioned herein are for educational purpose only. One should not take buy/sell decisions based on the above analysis which is prone to errors. The author does not undertake any liability whatsoever arising out of profits/losses accruing from using the above analysis.

CENTRAL BANK (CMP:188)

RECOMMENDATION : Buy at cmp
Target-210, Stop-179, Time-t+9 days

Rationale :
Significant traction post the breakout above the 170 level validates the ongoing bullishness. The positive rub off from the performance of other banking stocks makes it good momentum based trading bet.

KRBL (25.50)

RECOMMENDATION : BUY AGGRESSIVELY AT CMP
Target -37 , Stop:22, Time Horizon: 4 months


Rationale :
Elliott Perspective : Wave 1 and wave 2 have played out since the low of 08-09. Breach of the trendline shows the end of the 1st with the 2nd wave retracing barely 23% portraying innate strength in the stock. 1st and 2nd wave of the 3 rd seems to have been done and a move above 27 would give confirmation about the commencement of wave 3 . However it may be prudent to initiate positions right away because it may be very difficult to buy since the wave 3 is expected to be explosive.

Risk Perspective : The stock is currently trading very close to its support zone around 22.50-24. The stock has comfortably held on to this zone despite the ups and downs in the broader market in last few months. Hence, buying near the support is likely to be a safe ploy.

Peer Group Price Movement : Kohinooor Foods is trading at its rock solid support of 54 whereas Daawat too is doing the same around 60 (very close to the lows registered during the panic sell off of 08-09)

AMARA RAJA BATTERIES (CMP:193)

RECOMMENDATION : BUY AT CMP
Target - 223, Stop: 184, Time-T+4 days

Rationale :
Elliott Perspective : As the labelling in the above diagram suggests wave 1 and wave 2 have played out since the 08-09 lows. A mere 23.6 % correction and a C wave failure in wave 2 are embellishments of strength for the stock. Since the wave 1 of wave 3 has not been very powerful, it is only fair to assume a blowoff in 3 of 3.

Traditional Perspective : After breaking out of the sideways trading range the stock has pulled back. The gradient of this pullback highlights the sanctity of the breakout.

Risk Management : A stop below the low of wave 2 of wave 3 (i.e 184) can be used. If 184 breaks, the labelling would be rendered incorrect.

APOLLO TYRES (CMP:73)

RECOMMENDATION : Buy at cmp
Target - 88 , Stop : 68.50, Time - T+9 days

Rationale :
Elliott Perspective :Wave 1 and wave 2 completed around 59. Fall from 78 to 70 odd seems corrective and comprises the 4th wave of the 3rd.
Traditional Perspective : Fall from 78 to 70 odd comprises the classical pullback after the breakout.