Analysis: COLPAL

Colgate-Palmolive [stockquote]COLPAL[/stockquote] investors have had a tough 2013. After hitting an all-time high of Rs. 1580, the stock has slid to Rs. 1250 levels – a whopping 21% drop. Investors have been worried about falling sales in spite of holding prices steady and the imminent entry of P&G into the oral-care market. That said, Colgate holds over 54% of the toothpaste market and has been busy expanding its distribution and marketing into rural areas where per capita consumption of toothpaste is half that of urban areas.

COLPAL Technical Chart

We were a short-term buy back in February. However, the technicals this time are giving mixed signals. Our 4-9-18 model has been flipping between buy and sell all of this month and Aroon is stuck in neutral. However, RSI levels seem to be headed toward over-sold levels, suggesting a bounce from support at Rs. 1250 levels is possible.

The stock does pay a fair amount of dividend – Rs. 8/share was recently announced and given that its in the FMCG space, it is more-or-less recession proof. An extremely low beta of 0.16 provides a certain measure of comfort during volatile times.

COLPAL quarterly results

We would be buyer’s if the stock can hold on to its Rs. 1250 support levels over the next few days. Otherwise the next support is around Rs. 1200. This is a good stock to own for long-term buy-and-hold investors at these levels.

Analysis: COLPAL

Today’s pick is COLPAL [stockquote]COLPAL[/stockquote]. The stock has been on an uptrend for most part of the year. The stock experienced its 52 week high of Rs. 1,580 in December but since then the stock has been moving downwards retracing the gains. In the last three months, the stock has moved +2% vs. +5% of the Nifty’s.

COLPAL technical analysis chart

Oscillator RSI and CMO are close to the over-sold territory. The stock is trading in the middle of a narrowing Bollinger band giving no directional bias.

The MACD line has just penetrated the signal line in a bullish manner. However, Long-term and short-term GMMA lines can be seen inverted in a bearish manner given the downward movement of the stock.

COLPAL correlation chart

COLPAL’s average correlation with the Nifty is +0.26 which is positive but weak. The scrip will not be replicating movement of Nifty closely. [stockquote]NIFTYBEES[/stockquote]

COLPAL volatility chart

COLPAL has a historical volatility in the range of 0.3 to 0.7. The scrip’s volatility is currently in the lower end of the range and hence not a concern for the traders.

Given these technicals, we suggest a short-term buy. For the long-term we suggest to take a call based upon the expansion of the long-term GMMA lines. However trailing stop-losses will be of help in case sudden trend-reversal were to take place.