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Investors with medium-term perspective can consider buying the stock of Whirlpool of India (Rs 216.1). The company focuses on the fast growing segments of white goods – air-conditioners, washing machines and refrigerators. After peaking out at Rs 337 levels in October 2010, the stock has been trending down. However, the stock found support at Rs 200 and did a volte-face in February 2011. Following a rally to Rs 295 this April, the stock encountered resistance and started to slide. The significant support at Rs 200 arrested the stock's decline last week and it rebounded up triggered by the positive divergence displayed in the daily relative strength index and the daily price rate of change indicator. The stock advanced 5 per cent on August 11. The 14-day RSI which determines the speed and alteration of price movements has entered into the neutral region from the bearish zone and the weekly RSI has started to move higher in the bearish zone. Further, weekly price rate of change indicator is showing prolonged positive divergence.
The daily stochastic oscillator after displaying a positive divergence and has recovered from the oversold territory. It is currently rising in the neutral range. Taking into consideration that the stock is reversing higher from its significant support level of Rs 200 and the daily indicators and oscillators are displaying positive divergence we take a contrarian stance on Whirlpool of India from a medium-term perspective.
We are bullish on the stock from a medium-term perspective. We believe that the stock has the potential of trending higher and touching our price target of Rs 250 in the medium-term, following a minor pause at around Rs 235 levels. Investors with a medium-term perspective can consider buying the stock with stop-loss at Rs 198 levels.
Follow up – Escorts (Rs 73.5)
The stock tumbled 16 per cent in the previous week which was in line with our expectations. We reiterate our sell recommendation in the stock with the price target and stop-loss mentioned last week.
(This recommendation is based on technical analysis. There is a risk of loss in trading.)
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