Wednesday, January 9, 2013

Ratio Analysis: HUL/Nifty

By Waves Strategy Advisors (

HUL was one of the outperformer before, but has started underperforming since Oct 2012. At present, many investors find best opportunity to buy HUL on dip and expect a resumption of uptrend.
However, at the same time question arises that why HUL is not moving higher despite of strong up move of Nifty?
Answer is difficult and sideways action of stock increases confusion for the investors. But Ratio analysis of HUL/NIFTY clears the picture and down move in ratio indicates the start ofunderperformance of HUL against Nifty. This is cautious note for investors.
HUL/NIFTY Ratio Chart:

HUL Daily Chart: 

Waves Analysis:
Above first chart is of HUL/NIFTY ratio chart. Since February 2012 prices were moving higher in the upward moving blue channel (marked in blue color) and made a high of 0.050 in the month of October 2012. This indicates outperformance of HUL against Nifty in these nine months. However, it has formed double top near the same level, breached the channel on downside and moved lower. This has ended outperformance of this stock and started the underperformance against Nifty. At present, ratio is moving lower in the downward sloping channel. 0.040 is the strong resistance. As long as it is intact on upside ratio can move lower till 0.032 levels.
As shown on daily chart, in the month of October 2012 prices have made a high of 580, thereafter it has moved lower and formed H&S topping pattern. Neckline is placed at 515. A move below 515 will provide the first negative confirmation.
HUL is consolidating between the range of 515-550 levels from last few trading session. This is perfectly in sync with ratio chart and suggests weakness in this stock.
In short, a break below 515 – 510 can provide good selling opportunity for a move towards 470 - 450 levels which is the pattern target. However, any move above 555 will indicate short term uptrend is still intact.
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