Avoid These Six Stocks To Burn Your Fingers Again

Warren Buffett is arguably world's greatest stock investor. He is also a bit of a philosopher who pares down his investment ideas into simple, memorable sound bites. His philosophy of successful investing goes something like this.

There are two rules of investing.
Rule: 1 Don't' lose money.
Rule: 2 Never forget Rule 1.

Hence, if you are a trader looking to short a stock or an everyday investor looking to lower your risk exposure or an investor who has large number of stocks in his portfolio, identifying failing companies is absolutely crucial to abiding by rule number 1 i.e. don't lose money. Sometimes it can be just as important to know which stocks you shouldn't buy as it is you to know which one you should.

We bring this special report for our reader-investors at this time of the year mainly due to the following reasons:

1. We are heading near to one of the auspicious festival of Indian culture i.e. Diwali. Diwali is the festival of Goddess Lakshmi and Lord Ganesha. So just before Diwali, people across the nation begin cleaning their home and this is on the grounds that it is believed Goddess Lakshmi enters only a clean and tidy house. Subsequently, we would like investors to clean up their.

2. During December, 2015 after a gap of 10 years, the US Fed increased the interest rate and gave an indication that it'll raise the rate four times in the next year. However, due to instability in the global economy, it has kept the interest rates on hold. Nonetheless, there are strong odds that it's likely to raise interest rate in its meeting schedule in December, 2016. Hence, if this happens it would lead to a resumption of fears that the prolonged period of easy accessibility of money in the financial markets is coming to an end, which means investors will be urged to take their money out of the markets. The emerging markets which were only until recently gaining from increased appetite from investors in a search for yield,would find themselves suddenly pressurised to capital outflows. This would in turn mean sharp losses could be consequently felt across the emerging market currencies.

Aasif Hirani, Director, Tradebulls says, "Mid-cap is trading near 38 PE and small cap near 70 PE so we advise investors to approach market with caution. One should avoid illiquid stocks. Stick with companies which will deliver steady performance. We have seen in the past any disappointments in mid-caps/small-caps are punished severely. The rise in mid-cap was because they were quoted at large discount compare to large cap but not anymore. So there is no reason to rush into mid-cap/small-cap stocks now. A large part of the rally is based on hope and the market has already factored in a lot of positives. Investors should only pour money into mid-cap stocks now who have large investment horizon of 5-8 years.

Following is the list of six stocks which we have identified on the basis of technical patterns and parameters from NIFTY 500 index to avoid or exit.

CIPLA

BSE CODE :500087  CMP :Rs.581  FV : Rs.2

The stock is currently trading at 581 levels. Its 52-week high/low stands at Rs.704.90/Rs 457.45 made on October 29, 2015 and May 25, 2016 respectively. On the weekly time frame, the stock witnessed breakout around the levels of Rs 445-455 in the month of August, 2014. Since then, the stock entered into an uptrend and registered a high of Rs 739.36 in March, 2015. Thereafter, the stock entered into sideways to corrective phase and made tweezer bottom pattern around levels of Rs 561 and resumed its uptrend, however, the stock faced resistance around levels of Rs 732 and formed a double top pattern and entered into a corrective phase. One more reversal pattern is unfolding i.e. inverse cup and handle pattern. Considering the above technical factors, we are of the view that this stock could be an underperformer.

DB CORP

BSE CODE :533151  CMP :Rs.400  FV : Rs.10

The stock is currently trading at 400 levels. Its 52-week high/low stand at Rs 439/Rs 286.6 made on August 03, 2016 and January 21, 2016 respectively. DB Corp recently registered its all-time high at Rs 420 levels, which it had made during the beginning of March 2015. Looking at the historical daily chart, at the same level the stock formed ‘double top' formation and then corrected around 25 per cent to make low below the technical level of Rs 300. In the current scenario, the stock has slipped below its 50 days EMA support at Rs 396 level and has just hit 100 day EMA support Rs 385 level. Breaking Rs 385 level on closing basis would mean some more downside for the stock. Similarly, on the weekly charts, the 14-day RSI has turned down from overbought zone that suggests weakness in the stock. Overall looking at these factors, we can see more selloff in the stock as technical factors are not favourable.

IDEA CELLULAR

BSE CODE :532822  CMP :Rs.79.75  FV : Rs.10

The stock of idea is currently trading at Rs.79.75. Its 52 week high/low stands at Rs 160.30/78.05 made on December 07, 2015 and September 30, 2016. From the last few months, the stock witnessed southward moves after breaching its important technical levels of Rs 96.25 and Rs 88.99 which are the 100-day EMA and 50-day EMA respectively. On the weekly chart, the stock has in the mid-August, 2016, breached neckline of ‘Head and Shoulder "pattern. In the last one year or so, the stock could not cross its 200 day EMA level, which is at Rs 107. The stock also formed ‘lower tops lower bottom' formation in daily as well as weekly charts. However, in the recent sessions, the stock has seen descending pattern which is indicating immediate downtrend further. In the short term prospective, the company doesn't have positive sentiment, which brings some pullback.So,investors are adviced to avoid taking positions in the stock.

KELLTON TECH SOLUTIONS

BSE CODE :519602  CMP :Rs.108  FV : Rs.5

The stock is currently trading at 108 levels. Its 52-week high/low stand at Rs.246.50/Rs 103.15 made on March 09, 2016 and August 25, 2016 respectively. On the weekly time frame chart the stock formed a ‘Doji' candlestick pattern around its 52-week high levels. Since then, the stock is continuing with its sequence of lower top lower bottom pattern. On the daily chart, the stock has been trading below its important long term moving average i.e. its 200-day EMA for a long time. A decisive close below Rs 103 will open up gates for further correction. The momentum oscillator like the 14-period RSI is in a declining mode and not yet entered the oversold zone. Considering the above technical factors investors are adviced to avoid taking position in the stock.

PARSVNATH DEVELOPERS

BSE CODE :532780  CMP :Rs.13.99  FV : Rs.5

The stock is currently trading at 13.87 levels. Its 52-week high/low stand at Rs 30.15/Rs 12.90 made on December 07, 2015 and September 26, 2016 respectively. The stock after registering high of around Rs 38 in the month of June, 2014 entered into a corrective phase and thereafter the stock formed lower high. At present, the stock has witnessed breakdown of ‘Descending Triangle' pattern on the weekly charts along with more than average volumes. The descending triangle pattern is a bearish pattern that indicates distribution. In this pattern there are two or more comparable lows which forma horizontal line at the bottom and two or more declining peaks for a descending trend line. The momentum oscillator like the 14-period RSI is in a declining mode and not yet entered the oversold zone. Considering the above technical factors, investors are adviced to avoid positions in the stock.

TATA ELXSI

BSE CODE :500408  CMP :Rs.1346  FV : Rs.10

The stock is currently trading at Rs 1363. Its 52-week high/low stands on February 2, 2016 and October 7, 2016 respectively. This stock has been one of the best rewarding one for investors in the last couple of years. The stock was quoting around levels of Rs 457-465 in the month of May, 2014 and went to register high of Rs 2332.06. On the weekly chart, the stock has formed a double top pattern around the levels of Rs.2248-2332.The double top pattern is a bearish reversal pattern. The stock has also breached its important support zone which was pegged around levels of Rs.1510-1548. On the daily chart as well the trend has shifted in the favour of bears as the stock has slipped below its long term moving average i.e. its 200-day EMA. The momentum oscillator like RSI is in a declining mode. Considering the negative technical set-up, it's likely the stock will remain under pressure going forward.