Allcargo Logistics Ltd. (Allcargo), 3600 crores market cap company, is a leading logistics services player providing integrated logistics solutions. The stock has been source of anxiety for folks holding the stock in 2015.
Here's what Allcargo Logistics stock has done in 2015
In a market where midcaps are rallying like crazy - the chart is disappointing. But the question that matters: Does the chart give you the total picture. The answer is No. Here's what stock did in 2013 and 2014 -
Allcargo Logistics rallied from lows of 60 all the way to 360 i.e. 6x between August 2013 and Dec 2014. Now this chart can help you understand why stock has done nothing in 2015. After such a huge run, it's obvious that stock will trade sideways and consolidate the gains it made over last 18 months. So, now we understand that stock has rallied 6x and is consolidating but what's the future and is there any other chart one should look at. The answer is Yes...there is one more chart one should look at - Weekly chart spread over last 8 years
Allcargo Logistics broke out to NEW HIGH above 270 in Nov 2014. The Breakout was conclusive as stock rallied to 360. Now post breakout - as per Technical analysis - 270 becomes a solid support. The good news: In 2015 - stock has respected 270 and witnessed buying near 285.
Now the same daily chart which was looking disturbing earlier has started to make sense. As you can see in the chart above: 285 is turning out to be good base for the stock
What does this all mean?
Allcargo Logistics is trading at NEW HIGH above 270, and hence any pullback near 270-280 is a solid buying opportunity. The stock after huge run in 2013-2014 is digesting gains and giving opportunity for earnings and other fundamental factors to catch up. Remember, in situation of Breakouts, we can only control price risk and not time risk. At this point of time - one can assume that Allcargo Logistics will hold 270 on closing basis and not dip below 260. When the stock will take off again is a tough question to answer and if one feels bullish about Logistics theme - then one has no choice other than sit tight and let the story play itself out over time.
The idea of writing such a long post is to help you understand that why stock behaves in a certain way and how should one read it. Every stock has a story to tell. I am not making any recommendation. Please do your own due diligence.
Disclaimer – The state of the market notes is Deepak’s perspective on the market. The column is purely for educational purpose. Nothing contained herein is a solicitation to trade or a recommendation of a specific trade. By reading this publication you agree to make no trade relying in whole or in part on the comments of the writers