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Indian Stock Market --- Are Software shares waiting for a big breakout ?
8th June 1999 Anoop Singh Negi @bom3.vsnl.net.in
Friends, the flavour in the Indian stock market for the past month or so has been cyclical and bank stocks. The earlier darling of the stock market - the software sector, - appears to have lost its way and has been meandering in the wilderness for almost 3 months now. I have had a look at the charts of SATYAM, PENTAFOUR, DIGITAL and others. All the shares have consolidated for 3 months in various patterns. SATYAM has been moving in a huge triangular formation from 1- 4 -1999 onwards. It started dropping from a level of 1751 and dropped to a low of 992 on 28-04-1999 making the 1st leg of the motion. There after it rose to 1633 on 21-05-1999 to form the 2nd leg and now it appears to have completed the 3rd leg today at 1198. Thus 3 legs have already been formed and the triangle has started narrowing down telling us that a breakout is imminent any day now. If the share starts moving up from tomorrow on wards , then the 4th leg is in formation. The breakout could occur n the range of 1525 to 1555. The exact figure will become clear only when the breakout approaches the trendline that has kept the share down with its strong resistance. This triangle formation is a consolidation pattern for the steep upward movement of the share from a price of 500 to 1751. A similar pattern is being formed in the price pattern of PENTAFOUR SOFTWARE. In this case also 3 legs of the triangle have been formed and may be we are on to the 4th leg and the breakout. In the case of PENTAFOUR, the breakout level will be very near at around 1150-1170 level. The current price is 1080. Generally speaking triangular patterns occur midway in the price patterns of shares. A huge upmove , on the breakout , is being fore told by the price charts. Fundamentally too, the software shares should show excellent Q1 results for the qe 30-06-1999 and in expectation of that investors and institutions should start moving into these shares. So based on the above reasoning I expect the above 2 stocks to shake out the grip of lethargy that has overtaken the entire software industry. Any discussion welcome. Anoop Singh Negi http://www.agni.org/invest
