Monday, March 9, 2009

Indian Markets Mar 2009 : Cement Sector - Buying Opportunity

Cement Sector has received sops from the govt and is believed to be raring to go. Earlier in a post titled " Disaster Looming Large" I had outlined the fact that cement as a sector is reasonably comfortable vis-a-vis other sectors. From that point in time the sector did perform somewhat better than others in these difficult times. But what is to be understood firstly is the fact that price action takes place before any news reaches us, and secondly we are in a firm Bear hug. In short, cement sector scrips has already discounted the potential of current positive news flow in its price. So now the investment in this sector has to be made as per correct appreciation of future most probable trend.

Let us now analyse buying opportunities for two most important scrips in Cement Sector. We need to be conservative in our approach while seeking buying opportunities in an essentially Bear market and that's exactly how we are going to proceed.

ACC
ACC is undeniably in a precarious position as far as Bollinger Bands are concerned. It is within a very narrow band with upper and lower limits as 575 and 530 respectively. From the close of 530.2 on 06 Mar 2009 it appears to be dangerously poised to crash downwards since any break from the constricted Bollinger band signals sharp and swift movement.So any buying before 390 will be utterly adventurous and fraught with risk. MACD and CCI are also signalling fall from the current level. I think we should respect these signals instead of burning our fingers.

Ambuja Cement
Ambuja Cement is one step ahead of ACC. On 27 Feb 2009 it had already violated the constricted lower band of Bollinger, thereby indicating weakness. Though it has risen somewhat from that level but it still is weak to the core. Trade below 60 will plummet the scrip minimum to level of 50. As per Elliot Wave calculation there is buying opportunity at 54. So prudent thing will be to buy in the range of 50/54. This too will be short term buying and investors should look to realise profit of Rs 9/10 from level of 50/54.