Ravina Technologies: May 2013

Tuesday 7 May 2013

Sell IOB

We recommend a sell in the stock of Indian Overseas Bank from a short-term perspective. It is apparent from the charts of the stock that ever since peaking out in November 2010 peak of Rs 176, the stock has been in a long-term downtrend. Medium-term trend has been down from its January 2013 high of Rs 94. Following a corrective up move, the stock encountered key resistance at around Rs 75 recently and started to decline. Strengthening the stock’s downtrend, it fell almost 3 per cent with above average volume on Wednesday.

The stock is trading way below its 50 and 200-day moving averages. The daily as well as weekly relative strength indices have re-entered the bearish zone from the neutral region indicating downward momentum. Likewise, price rate of change indicators are hovering in the negative terrain implying selling interest. Medium-term downtrend is intact and the stock has resumed this trend.

We are bearish on the stock from a short-term perceptive. We expect its decline to prolong and reach our price target of Rs 58.4 or Rs 57 in the next month or so. Traders with short-term perspective can consider selling the stock with stop-loss at Rs 67 levels.

Smart Investor
Equity Research Division

Ravina Consulting
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BANGALORE 560084

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Buy LIC Housing on dips

We recommend a buy in the stock of LIC Housing Finance from a short-term perspective. It is evident from the charts of the stock that since marking an all-time high at Rs 300 on January 2, the stock has been on a medium-term downtrend. However, significant long-term support in the band between Rs 230 and Rs 240 arrested the stock's decline in late February and early March. Triggered by positive divergence in daily relative strength index, the stock changed direction.

Recently, the stock surged 3 per cent accompanied by above average volume. Both the daily as well as the weekly relative strength indices have entered the neutral region from the bearish zone. The daily moving average convergence divergence indicator has signalled a buy. Moreover, the daily price rate of change indicator has entered the positive territory from the negative territory implying buying interest.

As the stock is reversing higher from its significant long-term support we take a contrarian view and are bullish on the stock from a short-term perspective. We expect its rally to continue and reach our price target of Rs 259 or Rs 264 in the approaching trading sessions. Traders with short-term perspective can consider buying the stock with stop-loss at Rs 244 levels.