Sugar stocks: will the short-term rally sustain?

| Updated on: Jul 19, 2012






International sugar prices can be tracked through the raw sugar futures traded on Intercontinental Exchange (ICE).This contract touched a three-month high of 23.16 cents on July 19 The contract took support at around 19 cents in early June and reversed direction. Since then, the contract has been on a short-term uptrend. Sugar is displaying strength, surpassing the 21- and 50-day moving averages and trading well above them.

A brief technical view on three of the sugar stocks follows.

Bajaj Hindusthan (Rs 32.8): Bajaj Hindusthan is in a long-term downtrend since the high of Rs 205 marked in January 2010. The stock declined below its long-term support range between Rs 35 and Rs 38 in November 2011 and recorded a low at Rs 23 in last December. However, after consolidating sideways, the stock is now facing resistance in the range between Rs 35 and Rs 38 which is acting as a crucial hurdle. Conclusive jump above this band will take the stock higher to Rs 43 and then to Rs 50-52 levels in the medium-term.

But failure to surpass the key resistance band between Rs 35 and Rs 38 will pull the stock down to Rs 30 and then to Rs 24 in the medium-term. Short-term support for the stock is at Rs 31.5.

Bannari Amman Sugars (Rs 800): The stock emphatically broke out of its sideways consolidation range between Rs 500 and Rs 650 by jumping 11 per cent in the first week of July. Bullish momentum has continued and the stock has gained 22 per cent so far in July. The stock is presently testing key long-term resistance in the band between Rs 800 and Rs 820.

Moreover, its daily indicators are hovering in the overbought territory signalling a likely correction in the stock price. In such a scenario, the stock can decline to Rs 725 in the short-term. Key supports below the level are at Rs 650 and Rs 600.

On the upside, decisive breakthrough of resistance of the Rs 800 and Rs 820 band will lift the stock higher to Rs 900 and to Rs 1,000 in the medium-term with a minor pause around Rs 950.

Shree Renuka Sugars (Rs 32.9): Following a steep nosedive in mid-November 2011, breaking through a key long-term support at Rs 50, the stock found support in the base zone between Rs 22 and Rs 25 in last December. Long-term trend has been down for the stock since its January 2010 peak at Rs 123.

The stock’s long-term base zone Rs 22 and Rs 25 provided support in early June this year. Since then, the stock has been in a short-term uptrend. However, the stock met with a key resistance at around Rs 35. An emphatic breakthrough of this resistance will pave way for a rally to Rs 40 and Rs 42 range in the medium-term. Immediate support is positioned at Rs 30. Tumble below this base can drag the stock downwards to Rs 27.5 or to Rs 25 in the medium-term.


Published on July 19, 2012

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