BSE Capital Goods Index: A potential Candidate for a Breakout. BSE Capital Goods index this week has taken support near the Mother line on weekly chart. Currently the weekly close at 67151. Mother line support is at 66005. If the Index can manage to close above 67893 or 68227 there is a strong chance of revival which can take the index towards 70727, 71K or even 72K+ levels as indicated in the chart. For this to happen the index needs to hold current level not close below 66K levels (Mother line) and move Northwards. In case 66K is broken the index can fall towards 65 or 64K levels. Right now the support is taken so the index looks strong. The pattern that we are seeing on charts is similar to cup and handle formation in progress. The formation has not succeeded so far but if this formation comes in full effect, the index will become very strong.
When the index is strong and gives a breakout it means that the undercurrent in majority of the companies which constitute the index is strong. There will be some companies which will obviously drag the index down as there cannot be one-way traffic. To know amongst these which companies to invest in an investor should look at fundamentals of the company, recent and past results, cash flows, Sales and order books, EPS and many other factors. While a Technical investor should look at charts of the companies before investing.
The BSE Capital Goods index consists of 36 companies. The companies that constitute this index are HAL, Suzlon, Titagharh, BEL, Cochin Shipyard, Zentech, Mazdock, Fincables, BDL, Inox wind, CG Power, Kaynes, PTCIL, Polycab, Cummins, Power India, Apar, BHEL, ABB, Astral, Siemens, Kirloskar Engine, Triveni Turbine, KEI, Carborandum, Supreme Industries, Grindwell, Thermax, Praj, Elgi Equipments, Honeywell, Jyoti CNC, Timken, SKF India, AIA Engineering and LMW. The focus should be on companies which have major market which caters to local consumption or exports order to the US. Look for strong performers within this index who have given a good result this quarter and have strong EPS growth and good order books as well as trailing PE ratio less than 10 years Average PE ratio. This would result in you finding out the companies which are undervalued and have good growth potential. Capital Goods are essential for a country to grow. A strong GDP will mostly mean strong performance by some these companies.
A smart investor would be a person who looks at both fundamentals and technicals of the company and invests in a fundamentally strong company which is giving a technical breakout. For this one has to learn Techno-Funda analysis. I have written a book on the subject called The Happy Candles Way To Wealth Creation. In this book you will learn the basics of Techno-Funda investing. The book is available on Amazon and is one of the highest rated books in its category. With an approval rating of 4.8/5 as on date. Lot of investors call it as a Hand book for Techno Funda investing. Most of the chapters are standalone and can be read at your own accord. It will be really helpful to you. To know more about Mother line, Father line and my Mother, Father and Small child theory, Parallel Channel you should once again I recommend, read my book the Happy Candles Way to Wealth Creation.
Disclaimer: The above information is provided for educational purpose, analysis and paper trading only. Please don't treat this as a buy or sell recommendation for the stock or index. The Techno-Funda analysis is based on data that is more than 3 months old. Supports and Resistances are determined by historic past peaks and Valley in the chart. Many other indicators and patterns like EMA, RSI, MACD, Volumes, Fibonacci, parallel channel etc. use historic data which is 3 months or older cyclical points. There is no guarantee they will work in future as markets are highly volatile and swings in prices are also due to macro and micro factors based on actions taken by the company as well as region and global events. Equity investment is subject to risks. I or my clients or family members might have positions in the stocks that we mention in our educational posts. We will not be responsible for any Profit or loss that may occur due to any financial decision taken based on any data provided in this message. Do consult your investment advisor before taking any financial decisions. Stop losses should be an important part of any investment in equity.
