Sizzling Stocks - Bajaj Corp, Ambuja Cements, :: Business Line

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Bajaj Corp, (Rs 255)

Following the good results for December 2012 quarter, Bajaj Corp jumped 7 per cent during the day to register a new high at Rs 262 on Friday. The company announced an increase of 46 per cent in net profits against the year-ago period.Net sales too rose an impressive 32 per cent compared with the same period last year. Bajaj Corp shares settled the week by gaining 7.7 per cent with good volumes.

Since taking support at around Rs 120 in June 2012, the stock has been in an elevated uptrend. But its daily as well as weekly indicators and oscillators are featuring in the overbought levels signalling that the stock is due for a short-term correction. Further, the stock is testing the upper boundary of its daily and weekly Bollinger Bands, indicating overbought. Moreover, weekly relative strength index and price rate of change indicators are displaying negative divergence, signalling that a trend reversal in the stock is on the cards.

A downward reversal will take short-term support at Rs 240 and Rs 230 levels. Strong weekly close below Rs 230 will pull the stock down to Rs 210 or Rs 200 in the medium-term. Key support below Rs 200 is at Rs 180.

Continuation of the uptrend will encounter resistance at first Rs 270 and then at Rs 300 in the medium-term.

Ambuja Cements (Rs 186.4)

Cement stocks were in the limelight and declined in the previous week. Ambuja Cements tumbled 9.5 per cent last week, breaking through its key medium-term support at Rs 195. The stock's medium-term uptrend that started from its May 2012 low of Rs 135 had come to an end in October by registering a new high at Rs 220.

Triggered by negative divergence in daily moving average convergence divergence, the stock reversed direction in November and has since been in a medium-term downtrend. Short-term trend for the stock is also down. It has immediate significant support at Rs 180. A fall below this level will drag the stock down to the Rs 165-170 band in the medium-term. Next key support below this band is positioned at Rs 140.

However, a corrective rally will encounter resistance at the Rs 195-200 zone. A conclusive breakthrough of this resistance will take the stock higher to Rs 211 and then to Rs 220 in the medium-term.