Friday, August 15, 2008

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Breakdown of SELMCL

Let us take a look at how SELMCL did after the last post.

breakdown of selmcl

After two days of high percentage gains because of breakout from trend, it started showing retracement. As with any stock making new highs, the end will always involve all time high and a close below the previous day’s close. That too it should have a black candlestick. It normally behaved after that by opening high and closing down by the end of the day. But worst part came after an upmove day where it gained ten percent on Aug 7.

It was clear that it is consolidating but the next two days were not as expect. Normally its range would have been diminished and would have entered into a range trading pattern with different high and low values. But from August 8 onwards it was falling terribly and had two lower circuit days of 20% with huge volumes ever. Lot of trading activity happened in this stock. That clearly told its long term trend has changed in just two days. That is disastrous for any investor.

Though it happened as a sudden surprise I figured out the reason after these two large black candlesticks. It was affected by the Russia-Georgia war. Not that it is directly affected. But because it is just following the Russian markets ever since it was listed on bourses.

It is a garment export company with major markets in Russia and Middle East. This is one stock that was not at all affected by the mayhem in the general market rocked by US economic crisis. The reason was clear. Its markets are emerging and are not dependent on the US economy but rather US and EU are now heavily dependent on these countries. It is all to do with their oil. India is not like that. Both for oil and for export markets it is heavily dependent on US and EU. SELMCL was an exception this. That is why even though it listed in August 2007 within a year it made a low of 77 and high of 735.

There after it behaved as Russian markets are behaving everyday. We can confidently say that in the long term it is still good no matter what happens with Indian economy in general.

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