After a strong run in 2009 and 2010, Indian stocks, as represented by the India Fund, Inc. (NYSE:IFN) ETF, have been decimated. The ETF invests in the public equity markets of India and its performance is mirroring that of several other foreign market ETFs. One of the reasons for the recent declines can be attributed to the recent strength in the U.S. dollar, but there seems to be more at play. It seems that trust in foreign stocks has been waning on the heels of several charges of fraud against Chinese stocks, and of course, the contagion risk associated with several European stocks amidst their own financial crisis.

Looking more closely at IFN, it is clear that the ETF is in a steady downtrend spanning several months. IFN has been setting progressively lower lows and lower highs, as each rally has been a selling opportunity. Notice how the 50- and 200-day moving averages are perfectly aligned in a downtrend. This is a clear sign that the primary trend is lower. Volume has been gradually building, which could be viewed as a positive, but until IFN can set a higher high, it has to be considered a shorting opportunity on any strength. (For more, see Moving Averages: Introduction.)

Infosys Limited (Nasdaq:INFY) is an Indian IT consulting company that has been in a steady decline since topping out in early 2010. It is also in a clear pattern of lower lows and lower highs. INFY has been rejected in the past two tests of its 200-day moving average, as sellers overcome buyers. INFY is in a key area as it tries to form a higher low near $50, but still has a long way to go before seriously challenging for a higher high near $62. In fact, any weakness in the coming days could lead to a test of support near $46.

Indian online Internet company, (Nasdaq:REDF), is also near a key area on its chart. While it has lost over 50% of its stock value in the past few months, it remains in a large consolidation pattern and hasn't quite broken down yet. REDF has been gradually setting lower highs, but has had a solid floor underneath it. It will be interesting to see if REDF will once again find buyers near $7, as it has for most of 2011. The stock has not rallied at all recently, while the markets showed some strength and could be close to rolling over. Any sustained weakness under $7 would likely imply a test of the October lows near $5. (For related reading, check out 5 Indian Stocks To Consider.)

Sify Technologies Limited (Nasdaq:SIFY) is following an almost identical pattern to REDF. It has been in a consolidation despite being chopped in half from its April highs to current prices. It has been finding support at about $4 per share since the consolidation began and is currently just above that level. After months of dying volatility, SIFY should be close to a more substantial move as it reaches the apex of the triangle it has been following. A move to either direction should be worth trading.

The Bottom Line
Indian stocks have clearly been heading lower for the past several months and are showing very few signs of letting up. Many of these stocks are at critical areas on their charts, and if they don't find support soon, they could be headed much lower. While there is a sliver of hope that these stocks could find support soon, it will take much more work before they can become healthy. If they do in fact head lower, it could point to a dismal 2012 as well. (For more, see Technical Analysis: Introduction.)
Use the Investopedia Stock Simulator to trade the stocks mentioned in this stock analysis, risk free!

Charts courtesy of

At the time of writing, Joey Fundora did not own shares in any of the companies mentioned in this article.

Related Articles
  1. Chart Advisor

    Uptrending Stocks Dwindle, a Few Remain (EW, WEC, WR)

    The number of uptrending stocks is shrinking, but here a few that remain in uptrends.
  2. Chart Advisor

    Trade Setups Based on Descending Trend Channels (LBTYK, RRC)

    These descending trend channels have provided reliable sell signals in the past, and are giving the signal again.
  3. Chart Advisor

    How Are You Trading The Breakdown In Growth Stocks? (VOOG, IWF)

    Based on the charts of these two ETFs, bearish traders will start turning their attention to growth stocks.
  4. Chart Advisor

    Breakout Opportunity Stocks: CPA, GNRC, WWE

    After a period of contracting volatility, watch for breakouts and bigger moves to come in these stocks.
  5. Stock Analysis

    6 Risks International Stocks Face in 2016

    Learn about risk factors that can influence your investment in foreign stocks and funds, and what regions are more at-risk than others.
  6. Investing

    3 Things About International Investing and Currency

    As world monetary policy continues to diverge rocking bottom on interest rates while the Fed raises them, expect currencies to continue their bumpy ride.
  7. Investing News

    Tufts Economists: TPP Will Reduce U.S. GDP

    According to economists at Tufts University, the TPP agreement will destroy half a million jobs in the U.S. by 2025.
  8. Economics

    Governments Ask Tech Giants to Join War on ISIS

    In the US and Israel, governments have asked their respective nations' tech industries to help in the war against ISIS.
  9. Chart Advisor

    3 Charts That Suggest Now Is The Time To Invest In Real Estate (VNQ, SPG,PSA)

    Real estate assets have some of the strongest uptrends around. We'll take a look at three candidates poised for a move higher.
  10. Chart Advisor

    Stocks With More Upside Due to Bear Traps (TAP, SPY)

    A bear trap is a pattern that typically leads to at least a short-term rise in prices. Here are stocks exhibiting the pattern.
  1. What is Fibonacci retracement, and where do the ratios that are used come from?

    Fibonacci retracement is a very popular tool among technical traders and is based on the key numbers identified by mathematician ... Read Full Answer >>
  2. How do mutual funds work in India?

    Mutual funds in India work in much the same way as mutual funds in the United States. Like their American counterparts, Indian ... Read Full Answer >>
  3. What are some of the most common technical indicators that back up Doji patterns?

    The doji candlestick is important enough that Steve Nison devotes an entire chapter to it in his definitive work on candlestick ... Read Full Answer >>
  4. Tame Panic Selling with the Exhausted Selling Model

    The exhausted selling model is a pricing strategy used to identify and trade based off of the price floor of a security. ... Read Full Answer >>
  5. Point and Figure Charting Using Count Analysis

    Count analysis is a means of interpreting point and figure charts to measure vertical price movements. Technical analysts ... Read Full Answer >>
  6. What assumptions are made when conducting a t-test?

    The common assumptions made when doing a t-test include those regarding the scale of measurement, random sampling, normality ... Read Full Answer >>
Trading Center