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Saturday, December 1, 2012

What to do now with Zylog Systems?

A valued reader asks this question:

Question: Zylog is again drifting downwards towards 65....is it wise to buy now....
Fundamentally is it good ? Buyable ? or is it going down with point of no return ??



Answer: We covered Zylog systems here and here.

Zylog hit a short term bottom at 65 with huge volumes, and had a bounce upto 83. It is again drifting lower with considerable volumes, which are lower than 20th Nov volumes, but still very high.



Scrips like these, which fall considerably enter a bear market of their own. In this bear market, which may last upto 3-6 months, there will be several sharp bear rallies and most of them will fizzle out. What is happening internally is that informed internal buyers are buying at all declines, whereas large number of prior investors are averaging out and exiting at cost price or small profit/loss. So scrip will undergo a 3-6 months consolidation phase at these levels.

There might be a huge double or triple bottom chart pattern at these levels and only after all the weak hands have sold their shares to strong accumulating hands, a decent rally to prior levels can start. This consolidation may take 3-6 months.

So from current levels, downside is limited, and any upside will be used by stuck investors to offload, so serious upside is also limited.

One word of caution, if level of 65 gets broken with huge volumes, all bets are off! This will mean that there were hidden large sellers which broke the support levels and scrip will drift to much lower levels again. So we need to watch the charts carefully and act accordingly. Accumulate slowly and carefully is a good strategy from here.

9 comments:

  1. Thanks for that valuable post Naren, as always

    Perhaps we are in a bull market with much better opportunities....so might as well not take unnecessary risk, especially in a counter like this which is too much of a gamble

    Thanks a lot Naren

    ReplyDelete
  2. by the way, naren, is there any example in last 2-3 yrs where similar bear cartels have hammered stock prices but ultimately value prevailed and its back on track....

    ReplyDelete
    Replies
    1. Hi Ramit,

      Lot of good scrips were hammered in bear market of 2008 and regained their intrinsic value very quickly. Of course, liquidity in market during 09-10 also helped.

      Will share specific examples other than 09-10 timeframe.

      Delete
  3. Well, well, well....58 lower circuit...and tomorrow may be 55 levels...looking attractive now as its available at substantial discount....may be like u said, slow accumulation could be a wise strategy, especially in a market where most scrips have run up too much, and not many value buys easily available...

    One question, is zylog just a trading bet....buy at 50-55 sell at 66 for a quick 10-20%....or is it a good investment for a much bigger target for an year or so

    what is it that we, investors are overlooking, that is leading to such a steep downfall ??

    Thanks again

    ReplyDelete
  4. Can we by Zylog now?

    ReplyDelete
  5. hi naren thanks for all the information, is the rumours of zylog not paying salary to its employees is true ?

    ReplyDelete
  6. for last 3 months salary not paid - Zylog employee

    ReplyDelete
  7. Jan Salary is not credited still now. 28-02-2013 know whether company did something for employee.

    ReplyDelete

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