Archive for February, 2007

ZINC-ED on VALENTINES

The stock market saying goes like this, “Follow the trend”. But what if you are invested in Hindustan Zinc. SENSEX (even after the last few days fall) was up 5% from Dec 06, while HZNC was down 39%, a relative underperformance of 44%. Well this is nothing short of crisis for ZINC bulls. Even GOLD outperformed ZINC by more than 40% for the same period.

What happened? What does market have against ZINC lovers? And how could we at [bold]OR-PHE-US[/bold] identify a negative stock in an otherwise positive market? The ZINC fractal said it all. And could have avoided you getting ZINC-ED. What may not have helped you is the data, the mergers, the smelters and all those loads of information. Markets do not work on Information extrapolation. If you bought ZINC because of the Zinifex-Umicore merger, thinking the largest ZINC producer in the world (Reuters-12 Dec) might give you some portfolio efficiency…we are sorry…you might have to wait. Moreover, the other cliché, “HZNC is always a VALUE BUY”, might give some solace. Another 100 or 200 points, HZNC at 500 or 400 should be more attractive, to accumulate, to the otherwise ‘in dumps’ portfolio.

The first time we covered ZINC was on Nov 1, 2006 with a coverage on international spot prices and local ZINC majors Hindustan Zinc and Sterlite Industries. This was a special forecast for us, as we caught ZINC in an uptrend and saw prices extending gains before topping. The top for us was about 10% away from RECO prices. We were looking at a psychological 1000, HZNC topped at 1020. And then the anticipated dip started. After falling 39%, first to near our sighted targets at 660 and now to 600, the stock still seems away from a real bottom. We will keep you posted for any trading supports that come in. While this time around, try avoid getting ZINC-ED, atleast not on valentines.


Who is killing the cotton farmer?

We are in the Aquarian age, the age of unpredictability. The hedging system we proudly create and boast off can not safeguard the very farmer, the first user of risk management. The farmer was the reason why we created the system in the first place.

In the past 18 months, 1200 cotton farmers of Vidarbha (Cotton Bowl of India) have taken their own lives to escape debts to money-lenders. Award winning markets, but we got late.

You can blame his illiteracy that he could not beat his fate. But political apathy only makes this one of the many events, that will miss the cover page. We are busy with more important essential talk of profit. The poor farmer did not understand the investment and took a safe bet steeping into a drought tolerant field crop. Global prices kept the supply pressure up to lead to the unfortunate incident.

But then you can not really hate COTTON, the fiber followed its natural rhythm as it headed down in a multi year C wave down. And just like every body loves equity now, the hate for the crop is also at an extreme. We at OR-PHE-US believe the worse times for cotton might be getting over. As no one wants to touch the asset at current prices. We have carried MCX Long Cotton here along with the Dow Jones Cotton Index. MCX cotton has broken a 15 month trendline and the Intermediate term still seems negative. While Dow Jones Cotton Index is finishing a multi year and a multi decade bottom. We anticipate supports coming in on the intermediate time frame soon enough. Till MCX Long Cotton does not cross above 18400, we expect a dip below 16400.