Orpheus: Reliance Natural Gas, BSE Oil Index
The latest missive from Orpheus Capitals - Staying ahead of NAT GAS - talks about a bull market in natural gas, and a corresponding stock pick: Reliance Natural Gas.
We still believe natural gas is a winner and has a potential to move to as high as $20 in 2008. This is a sizeable move, not only from $4 but also if we consider any equity drawdown in coming months till 2008.
. . . staying ahead of natural gas needs more than a proverbial review of “sell in May and go away”.
Unfortunately, I am unable to re-create the two charts that they refer to in the article, thanks to the BSE’s horrible web interface for downloading historical data.
Nevertheless, Orpheus shows how relative strength analysis can be a simple but powerful way to pick stocks.
More examples/tutorials on relative strength analysis:
- Ticker Sense: Sector Relative Strength
- Stockcharts.com: Relative Strength Index (RSI)
- Bill Cara: The Use of RSI
Related Posts:
June 4th, 2007 at 11:11 am
Its Reliance Natural Resources and not Reliance Natural Gas which is listed. Secondly RNRL is an Anil Ambani group company which is not into natural gas discovery but into gas based power generation, and I think they have to depend on Reliance Industries to supply it. So a better stock to buy is RIL and maybe not RNRL!
June 4th, 2007 at 11:25 am
Amit: Thanks for the correction. However, the RS analysis is certainly based on RNRL. not RIL. Moreover, given RIL’s range of businesses, it may not be a “pure play” on natural gas based power generation.
June 4th, 2007 at 11:37 am
But since RNRL is dependent on natural gas and if the prices rise faster than other fuel alternatives, wouldnt RNRL cost of production too rise and make it unattractive.
June 4th, 2007 at 11:54 am
It depends: RNRL can do several things (hedge costs using futures, enter into a favorable purchase agreement with RIL, pass on costs to customers, etc) which can offset the price rise in the commodity.
For example, check this: http://us.rediff.com/money/2006/feb/04ril.htm
I think the bullish argument is from the demand side: Given the acute power shortage in India, there should be plenty of demand even at higher price points. But look at its fantastic growth prospects, given India’s plans for infrastructure spending!
June 5th, 2007 at 9:54 am
-download historical data from NSE
-plot against RELIANCE.NS , as it closely indicates S&P
I think you must have tried this.
Is it the RS you mean ?
Thanks
June 5th, 2007 at 10:01 am
Well, the article compares Sensex with the BSE Oil & Gas index to show relative strength in the latter; it then plots the Oil & Gas index vs. RNRL (not RELIANCE.NS) to show relative strength in the stock. I can’t duplicate this using NSE data. NSE’s Energy Sector index doesn’t even include RNRL.
June 10th, 2007 at 10:54 am
Doesn’t RNRL have an agreement of buying natural gas from RIL at a cheaper rate than it gives to other clients? I had read about this when the reliance split happened.
August 7th, 2007 at 3:35 pm
RNRL has already moved up and has stayed steady despite the correction. Good pick!
August 8th, 2007 at 2:26 pm
Thanks, but not really my ‘pick’ - the credit goes to Orpheus for catching a 30% move since early June.
September 20th, 2007 at 9:38 pm
RNRL has touched nearly 60- meaning a nearlt90% rise since Orpheus tracked it
September 21st, 2007 at 7:17 pm
I have purchased RNRL at Rs77.7 and i think, it will go up definitly because of demand issues.
What say?