JP Associates was a darling of the Indian stock market when infrastructure story was given a lot of hype by FIIs and domestic institutions alike. Stock as long as 2005 was among not so favored counters when it came to investments by large institutions. There were issues (although not so public) relating to corporate governance and the promoters closeness to politicians. After 2005 it became a hot property and in the highs of 2008 it reached a level of 300-320.
2008 marked the end of the dream run and it has been on a steady downtrend since. October 2008 marked the worst period of stock market in last decade. JP Associates did no better and the stock reached high 30 levels in the bloodbath. Stock made recovery to 160 levels in 2009 phase but by that time investor community realised that while India might hold a great infrastructure potential the execution risks in a country like India may not convert the same into very profitable ventures. Coupled with that the FCCB redemption is draining out the much needed cash for the company.
JP Associate once again reached around 50 levels in Dec 2011 from the downtrend in weekly charts that started in 2010 Jan. But these are the kind of stocks when they turnaround may give very good returns to investors.
Technical factors in favour of JP Associate:
a) After forming a double bottom around 50 levels the stock has formed an uptrend and a higher bottom around 65-70 levels. Unlike last few times the stock has formed a higher bottom
b) Stock has violated the downtrend line and is able to sustain upwards.
c) In the last 3 weeks when the broader markets have trended downwards the stock has shown resilience.
d) Short term moving averages are trending upwards and also a crossover between 20 and 32 EMA on weekly charts.
What can go wrong?
If there is a false breakout above the downtrend line which will be proved by violation of the bottom around 65-70 the stock can again go into the same old downtrend.
Strategy
Buy at current levels around 80 with a stoploss at 67. The stock has a good upside potential. If the trend holds the stock should give a medium term movement till 100 (+25% returns) and on a longer term horizon towards 135-140 levels where there is stiff resistance. Hence the stock has a good risk reward ratio.
2008 marked the end of the dream run and it has been on a steady downtrend since. October 2008 marked the worst period of stock market in last decade. JP Associates did no better and the stock reached high 30 levels in the bloodbath. Stock made recovery to 160 levels in 2009 phase but by that time investor community realised that while India might hold a great infrastructure potential the execution risks in a country like India may not convert the same into very profitable ventures. Coupled with that the FCCB redemption is draining out the much needed cash for the company.
JP Associate once again reached around 50 levels in Dec 2011 from the downtrend in weekly charts that started in 2010 Jan. But these are the kind of stocks when they turnaround may give very good returns to investors.
Technical factors in favour of JP Associate:
a) After forming a double bottom around 50 levels the stock has formed an uptrend and a higher bottom around 65-70 levels. Unlike last few times the stock has formed a higher bottom
b) Stock has violated the downtrend line and is able to sustain upwards.
c) In the last 3 weeks when the broader markets have trended downwards the stock has shown resilience.
d) Short term moving averages are trending upwards and also a crossover between 20 and 32 EMA on weekly charts.
What can go wrong?
If there is a false breakout above the downtrend line which will be proved by violation of the bottom around 65-70 the stock can again go into the same old downtrend.
Strategy
Buy at current levels around 80 with a stoploss at 67. The stock has a good upside potential. If the trend holds the stock should give a medium term movement till 100 (+25% returns) and on a longer term horizon towards 135-140 levels where there is stiff resistance. Hence the stock has a good risk reward ratio.
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