BATA INDIA: WILL IT CONTINUE UPWARD MOVEMENT OR A CORRECTION IS ON THE WAY 10TH MAY 2012

Bata India on the weekly chart

Bata India has been a favorite stock for the value investors. People discovered its value in the early 2009 when the market, after the catastrophic decline of 2008, started to gather strength and started moving up. Bata India was trading at the levels of hundred and change. On the way up it gathered mass as can be seen on the charts. It moved up flawlessly until it found resistance at the 730 740 levels it came back all the way to 520 528 levels and then once again it moved to try and surpass the 731 levels. Now in the process of doing so it made a very distinct and potent inverse head and shoulder as can be seen on the second chart. After breaking out of this head and shoulder, in the way it should, the price target was somewhere in between 910 930. The high that has been established by Bata India is 887 which is almost the target. After breaking out of the head and shoulder formation, the prices started to move in a channel. Now what we can gather about the next move of the prices from the charts are as under The prices have managed to stay above the 50 tick moving average (each tick represents a week), but they have to converge towards the moving average, reversion to the mean. If it does so the prices will have to come down. Considering the last three ticks, the first from the left is a hanging man (a bearish signal) which is followed by a shooting star (a very potent bearish signal in context of the technical analysis) this is followed by another shooting star.

There is divergence on the MACD and RSI as well which indicate that the momentum has been decreasing. RSI is in the overbought territory.

All these signals signal a downward move which is likely in the near future. Now on the way down certain important supports that the prices may encounter are, first of them would be the 731 level which has previously acted as the neck line. Since it was a crucial resistance, it will be a crucial support as well. Second would be the moving average aforementioned, and in case prices have to fall even below that 528 520 will the next support.