Market Strategy

Sizzling Stocks: SKS Microfinance, Bajaj Auto

Yoganand D. | Updated on May 07, 2011 Published on May 07, 2011

SKS Microfinance (Rs 331.3)

SKS Microfinance nosedived 27 per cent last week and recorded an all-time low of Rs 330.6. The decline accelerated on Friday following poor earnings declared for the fourth quarter.

Since peaking out at Rs 1,490 in September 2010, the stock has been on an intermediate-term downtrend. The short-term trend is also pointing downwards and the stock is hovering well below its 21- and 50-day moving averages. As it fell sharply last week, its daily relative strength index has entered the deep oversold region. Further, the stock has breached its lower boundary in the Bollinger Bands, again indicating weakness. Any up-move will encounter resistance at Rs 355 or Rs 385 in the near-term. Inability to move higher above Rs 355 will be a signal that the stock is in bear's grip and it can make new lows in the ensuing weeks. The next significant medium-term resistances are at Rs 400 and Rs 447. Only a strong move upwards above Rs 550 will negate the short-term downtrend.

Bajaj Auto (Rs 1,319)

Bajaj Auto plunged almost 10 per cent in the previous week after encountering key resistance around Rs 1,500 levels. The stock has conclusively penetrated its intermediate-term support around Rs 1,360 by tumbling almost 5 per cent with good volumes on May 4. Also, it is hovering way below its 200-day moving average. Failure to move above its key immediate resistance at Rs 1,360 can pull the stock down to Rs 1,250 or even to Rs 1,200 in the upcoming weeks. Conclusive weekly close below Rs 1,200 will reinforce the stock's downtrend and can drag it to Rs 1,100 in the medium-term.

On the other hand, emphatic move beyond Rs 1,360 can lift the stock higher to Rs 1,420 and Rs 1,450. Strong up move above Rs 1,500 is required to mitigate medium-term downtrend. Significant resistance above Rs 1,500 is pegged at Rs 1,600.

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