Archive for March 13th, 2012

The Aluminum Special

 

Timing is everything. Investing a quarter too early can influence the annual return on your portfolio. Now that Hindalco reached near 111 lows it reminds us of the great buy opportunity of 2009 when the stock was sub 40. Before we make our case for Hindalco whether to invest now or later, let us tell you some basic sentiment rules. Markets don’t give positive news when the stock is at lows or historical lows. Whether it’s slapping of fines or international Aluminum prices, don’t expect indications to be clear and confirming.

Seek insights rather than facts. It’s common sense that if Oil prices remain above dollar 100, alternative energy will benefit. It’s the same like saying that Aluminum prices have to stay higher for smelters to remain profitable. These are industry facts, where’s the insight?
Fundamentals could give some insight, but there are so many industry variables that just looking at the company’s balance sheet won’t help us time.

So what we do? One might say, let’s look at technicals. There is a head and shoulder structure and prices are below moving average etc. Pattern watching might help, but head and shoulders is a poor pattern more prone to failure than success (read ‘I saw it first illusion’) 

Can we make the analysis more holistic and objective?

1) Jiseki is an objective indicator that is designed to move up as performance is positive and vice versa. Hindalco is still suggesting a negative quarterly (grey cycle) and it might be too early to get positive on the stock.

2) From an intermarket perspective, it’s just an illusion that Hindalco has fallen more than all of it’s sector peers. Sector peers are not just other Aluminum and metal stocks, they are also Aluminum commodity (DOW Aluminum) indices and ETFs (ALMN.L). Compared to many sector peers since 2009, Hindalco is still among the top performers. (not as much as TICSO, SAIL and HZNC , which are running shorts). So all that talk about Aluminum international prices are subdued and effecting Hindalco is not true. Aluminum spot prices are one of the worst in the metals sector, while Hindalco is far from worst. So we won’t be surprise if we actually see Aluminum prices rising before Hindalco.

3) “Ok! We get it” but show us the signals. The Jiseki cycle crossover signal is still in a sell and technically the stock has shown a poor retracement of the previous high. The structure looks weak and far from an accumulate or buy. The current report has run three pairs for you on a) Long DOW Aluminum and Short Hindalco, b) Long ALUM ETF and short Hindalco and c) Long BSE500 and Short Hindalco. The results are for you to see and judge, how Jiseki performed in these asset selections and whether Hindalco has really turned up for good or you should rather wait for a real reversal. Enjoy the latest ALPHA.

To read the latest report download it from our Reuters Store or mail us for subscription details.

Our Jiseki Time cycles are seasonal patterns of strength or weakness in assets. They are derived from percentile rankings from 1 to 100. The higher the percentile more the chance for an asset to weaken and worst the ranking, better the chance for the respective asset to outperform. 100 is top relative performance and 1 is worst performance. The idea is that performance is cyclical. A top performer will underperform in future and vice versa. A top relative performer is also the worst value pick and the top relative underperformer is the best value pick. Jiseki is another name for Performance cycles, time triads and time fractals. The signals are illustrated as a running portfolio and as Jiseki Indices. These signals can be used by fund managers for relative allocations, traders for leverage bets and high net worth clients for selective trades.

Jiseki Interpretation. Signals are interpreted as crossovers between various Jiseki Cycles. All three Jiseki cycles (Jiseki 1,2 and 3) depict different time frames. Example: An asset is ranked above 80 percentile and all the three Jiseki cycles are pointing lower, this suggests a running SHORT SIGNAL. Our Jiseki Indices use different kind of exits based on price and Jiseki Cycles. We have color coded the (Jiseki 1>Jiseki 2) SHORT zones with brown sandy (burlywood) and grey (Jiseki 1>Jiseki2) for LONG SIGNALS.

Coverage India: CNX100 traded stocks and Indian Indices.

Michesan Anna-Maria, discovered her interest of markets immediately after completing her graduate studies in Economics. She followed it up with post graduate studies in corporate finance. A host of research work in behavioral finance, option strategies and quantifying market sentiment followed. Anna covers Indian equity and combines Elliott, Time Fractals and Time Analytics to deliver accuracy across time frames.