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RCOM Short Term Analysis


RCOM has some good things going for it. And look at a technical chart:


The stock’s up a further 2.3% at 183, as I write.

Resistance is around the 192 levels, which is around the 200 DMA and a peak about six months ago. The fall all the way from 352 in May 2009 has a fib-retracement level at 204 – these are levels to watch for as resistance not for any reason other than the fact that multiple traders watch these levels.

The news is that RCOM has patched differences with RIL, and will help RIL in the broadband web access area. RIL just bought a 95% stake in Infotel which will pay about 12,000 cr. for pan-India broadband. RCOM also is considering a stake sale or a demerger of its tower business, which carries a large portion of RCOM debt.

I’m not sure this is in anyway really positive for RCOM. The business will still have a lot of debt. The voice business is saturating, and all broadband web access will do is to reduce the rates some more. The patch up with RIL is at best temporary. The good part: The equity stake sale of a tower business is currently going through inflated valuations so selling is good. And the BWA might actually help use of the Flag infrastructure RCOM owns, though they will have to use a lot more fiber now.

The stock is in a short term uptrend. But with volumes slowing down, we might see a quick reversal to the 150-160 levels if it hits a pocket of resistance.


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