LONG TERM INVESTMENT REVIEW: HINDUSTAN UNILEVER

FMCG leader Hindustan Unilever Limited has seen some good buying coming in with an increase in the volumes and momentum. This clearly indicated that the investors are responding to the stock inspite of the market not giving a clear trend and this seems to be a good signal for the stock.

Moving to the technical picture on the monthly chart, we find that prices have been exhibiting a nice renewed move after having formed a broad lateral range over the past few months and now making all attempts to breakout higher.

The stock after making its top at 315 levels (ex-split & ex-bonus) in Feb 00, made lower tops and lower bottoms on the monthly charts. Prices dropped sharply and touched a low of 100 in August 04 led by some negative news from the company front and major research houses flashing a sell report on the stock. From hereon, the stock steadied down and attempted to move up afresh. After having maintained a super rally since then, prices during the latter half of 2005 started making some fresh attempts to overcome the primary descending trendline resistance drawn from the 315 top. Some volume led buying activity and good confirmation of this effort saw prices move up smartly. In doing so prices also managed to surpass the preceding two lower tops and went on to make a new swing top of 296 levels in April 06. This uptrend was arrested by the way of market crash in May 06. The stock lost its steam as investors choose to exit from the stock and collecting some fat profits in the bargain. Prices by early March 07 had plunged to test the 61.8% retracement of the prior rising swing (100-296) and shifted to a lateral phase. Lack of ownership led to no major impact on the prices during the Jan 08 crash. Some renewed buying interest emerged in the stock, mainly by index funds and in the bargain the stock managed to witness gains on a month on month basis and over performed the index. Prices on the short term are forming a broad fractal accumulation pattern, which reaffirms long term bullish outlook.

On the oscillators front the monthly readings depict a positive picture. The MACD has seen a positive cross over. Also the CCI has moved into the positive zone suggesting that the current upmove is likely to persist. On the daily charts, the stock seems to have hit some resistance around the 240-245 areas which is a crucial hurdle to cross if the stock has to move up. The Price ROC oscillator continues to retain the positive ground and holding above the zero regions – an
important support zone. So putting together, we can conclude that overall picture on the higher and lower degree charts in terms of price and momentum are in good health. Chances are good that the prices may continue moving from current levels or even from dips towards 220 levels.

Target to look at is 286 / 315-25 / 350.

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Tags: hindustan unilever investment, HUL

Category: Long Term