LARSEN & TOUBRO (L&T) VIEW

Usually we don't track n analyze individual stocks but 2 days back one of our friend asked is there any news related to LT, why the stock is falling and whether we should buy LT from long term perspective?
We think fundamental analysis needs understanding of economy as well as individual company and u should be able to analyze company result every quarter. We searched for LT related news and found that there is slow down in orders, also there is margin pressure that may be reason why stock is falling.

LT is one of the largest and most respected company in India's private sector so from long term perspective (for 5-10 year) it is good buy at current market price. But we think by applying technical analysis we can time our entry or exit from stock, as per saying every news is all ready reflected in charts and news follows later on, we decided to study weekly chart for long term perspective and daily chart for short term view.

LONG TERM VIEW :

CHART 1

  So from above chart it is clear that LT made HEAD N SHOULDER PATTERN on weekly chart, and broken down the neck line on 23/9/11 (weekly closing basis). The target for this pattern comes to be 1200. So looks like it will fall to 1200.
 NOTE :- Any long term investor who is following weekly chart may have exited LT on 7/1/11 at price1845-50.
On weekly chart according to recent chart unless there is weekly close above 1723 there will not be uptrend. This level may change in future according to price action, we will post whenever there is uptrend, so keep following.

SHORT TERM VIEW :-

CHART 2

 As shown in chart 2 above there is positive divergence, so in short term looks like it will target 1400-1450-1500. The stop loss for this trade is daily close below recent low which is 1267. By buying at present current price and managing the trade technically ( i.e. by using trailing stop loss ), there is possibility that one can earn 5-10%.

NOTE:- As shown in chart 2 in august also there is positive divergence, if someone has traded that he may have earned 6-15% at that time.
Even though L & T has lost almost 38% from Nov 10, if someone has traded these two positive divergences only in L & T , he should have earned 10-15%. This is how technical analysis is more useful than fundamental analysis, there is no need to study results, track news or watch television channels.

KINDLY NOTE WHEN WEEKLY CHART INDICATED TO EXIT L & T ON 7/1/11, THERE ARE NO NEWS RELATED TO EUROPEAN DEBT CRISIS, INFLATION, RISING INTEREST RATE, ORDER SLOW DOWN OR MARGIN PRESSURE, ALL THOSE NEWS FOLLOWED LATER ON WHAT IS INDICATED BY TECHNICALS  MUCH EARLIER.

DISCLAIMER: This Blog is meant for sharing my trading ideas only and no calls to be taken as trading recommendation. Visitors please do your own research or consult your advisers for safe trading.