Thursday, July 22, 2010

Bookkeeping: Closing Dr. Reddy's Laboratories (RDY) on Technical Damage from Earnings

It's good to know insider trading is alive and well....err, I mean it's good to see that the "free market" and "smart money" is able to forecast an earnings miss ahead of time. ;)  That's what makes them so "smart".   Yesterday we wondered why Dr. Reddy's Laboratories (RDY) was acting so poorly - this was when the market was flat, and the stock was breaking down.  There was no news.  I said yesterday I would shoot first and ask questions later.

Whatever the case, the past 2 sessions it has weakened considerably and if it closes where it is as I type, it will have broken the 50 day moving average on a closing basis for the first time since mid May. That is always a concern and the general policy when this happens is reduce exposure and then watch what it does next.

Lo and behold someone "smart" was getting out en masse before today's earnings. 15 years ago I'd scream for the SEC to investigate (I was so idealistic back then)  but I know now they are busy watching porn, so we'll just laugh it off as business as usual in our corrupt casino, and tip my hat towards the "smart money" that got out on news they had before the rest of us.  Consider the sheep fleeced!   (p.s. I wonder if any "smart firms" were buying puts or shorting stock yesterday - if I were a curious staffer at the SEC I'd probably go investigate but ... oh wait, look a new XXX site.)

Chart yesterday when it was acting strange....(this was before the news was released ...even in India)

Chart today, you can see now clearly in retrospect the volume spike as "smart money" left the bagholders in their dust.  Yet another reason to use technical analysis - it helps you see what those with big footprints are doing.

I will be closing the position here, I only kept 0.3% exposure on after yesterday's sale and am taking a 6% loss on this nominal position.  The chart is obviously now not very attractive ... and it looks like some "gaps" are going to get filled.   I am sure I will be back in the future at some point.

  • Dr Reddy's Laboratories Ltd, India's No. 2 drugmaker by sales, said on Thursday consolidated quarterly profit fell more-than-expected 14.3% following a drop in sales in its key U.S. market.
  • The New York-listed company (RDY) reported a consolidated net profit of 2.1 billion rupees ($44.5 million) in its fiscal first quarter ended June, down from 2.45 billion rupees a year earlier, under international accounting standards.
  • Revenue fell 7.5% to 16.83 billion rupees, as sales in North America, its biggest export market, fell 35% to 3.9 billion rupees and European revenue dipped 9.5% to 1.9 billion rupees.
  • A Reuters poll of brokerages had estimated quarterly profit at 2.19 billion rupees on revenue of 17.91 billion rupees.

No position (other than quiet laughter)


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