Analysis: CAIRN

Today’s pick is CAIRN [stockquote]CAIRN[/stockquote]. The stock started the year with a rush to Rs. 400. The momentum exhausted and left the stock plunging to Rs. 300 levels by May. The stock tested this support level quite many times since then and has just started moving up after breaking out of the pennant in late December. In the last three months, the stock has not moved at all vs. +6% move of the Nifty’s.

CAIRN technical analysis chart

Oscillators RSI and CMO are close to the over-bought territory but are not showing any bias.

The MACD line and signal line are moving very close to each other unable to suggest any short-term direction. Although decreasing histogram levels are pointing to an imminent short-term bearish move. Long-term and short-term GMMA lines are very close to each other and are not able to point at the direction of stock movement.

CAIRN correlation chart

CAIRN’s average correlation with the Nifty is 0.49 is positive. The scrip will be replicating the movement of Nifty. [stockquote]NIFTYBEES[/stockquote]

CAIRN volaitility chart

CAIRN has a historical volatility in the range of 0.2 to 0.6. The scrip’s volatility however is currently in the lower end of the range and hence should not be a concern to the traders.

Life insurance corporation of India bought Rs 1,291 Crore worth of shares on 3rd Jan in an insider trade instance.

Given these technicals, we suggest a short-term Hold. A Long-term call could be taken once the GMMA lines start to spread and give out a positive cue. It will be beneficial to have trailing stop-losses in place, in order to book profits if a trend-reversal were to take place.

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