Please let me know the long-term outlook of Larsen and Toubro.

T.D. Bhatia

Larsen and Toubro (Rs 1,382.2): The secular trend in Larsen and Toubro is up since the 2003 low of Rs 43. One leg of this uptrend has ended at the 2007 peak at Rs 1,949 and the stock is consolidating in a wide trading band since then. Although the 2008 decline was very severe and dragged the stock below its critical long-term support at Rs 925, the stock has recovered in no time to move above this level in the first half of 2009.

The stock is in a protracted decline again from the November 2010 peak of Rs 2,212. In our last review of this stock in December 2011, we had written that there was strong support at Rs 1,000. We had also advised investors to buy the stock with stop at Rs 870.

The stock is attempting to stabilise above this support that is also the floor of the gap formed in May 2009. The stock is however finding it hard to move above the hurdle at Rs 1,450 indicated in our last review. It would be best if fresh buying with long-term perspective is done only after the stock records a firm weekly close above this level. Subsequent targets are Rs 1,600 and Rs 1,740.

Long-term supports on decline below Rs 1,000 are at Rs 870 and Rs 556.

Please provide technical details of Alicon Castlloy and Ricoh India.

Suvarna Pawar

Alicon Castalloy (Rs 60): This stock is moving in a sideways range between Rs 50 and Rs 80 since February 2011. This move follows a sharp down-move from the peak of August 2010. Investors can draw comfort from the fact that the stock is attempting to move around the key long-term support at Rs 65.

The stock has support in the zone between Rs 50 and Rs 65. Investors can continue to hold the stock with stop at Rs 47. Decline below this level will result in the stock moving lower to Rs 20 or Rs 12 over the long-term.

Medium-term resistances will be at Rs 87 and Rs 112. Key long-term resistance will however be at Rs 143.

Inability to move beyond this level will result in the stock moving in a broad band between Rs 10 and Rs 100 over the months ahead.

Ricoh India (Rs 69.8): Ricoh India is in a medium-term uptrend since the March 2009 low of Rs 12. The third leg of this uptrend appears to be unfolding now.

The current uptrend faces resistance at Rs 64. This occurs at 61.8 per cent retracement of the down-move from the August 2005 peak at Rs 95. The stock moved strongly above this resistance on Friday.

Investors with short to medium-term perspective should, however, exercise caution at these levels. If this is a false break-out, the stock can revert below Rs 64 again next week. That will result in the stock declining all the way to Rs 44 or Rs 31. Conversely, if the up-move sustains, the stock can move on to Rs 87 or Rs 95 over the long-term.

I have bought Reliance Infrastructure at Rs 537 and JP Associates at Rs 73. Should I wait for the stock price to increase or sell at current market price?

Madhusudan Tosh, Anil

Reliance Infrastructure (Rs 503.6): The trends along all time-frames, long, medium and short-term are currently down in Reliance Infrastructure.

Short-term support is at Rs 416. Investors can therefore hold the stock with stop at Rs 400. Decline below this level will, however, result in the stock falling all the way down to Rs 328. Since the stock has reversed higher from the support zone between Rs 325 and Rs 350 twice (in October 2008 and again in June 2012), long-term investors can hold the stock with deeper stop-loss at Rs 300.

Medium-term resistances will be at Rs 750 and Rs 1,000. Key long-term resistance is in the zone between Rs 1,200 and Rs 1,400.

Jaiprakash Associates (Rs 73.3): JP Associates is moving sideways since this January, in a broad band between Rs 50 and Rs 90. Investors can hold the stock with stop-loss below the recent trough at Rs 58.

Short-term resistances will be at Rs 89 and then Rs 100. Investors with short-term perspective can divest their holding at either of these levels. Subsequent hurdles will be at Rs 130, Rs 148 and then Rs 180.

Key long-term resistance for the stock would be at Rs 185, while long-term support will be available at Rs 30.

I have bought BEML at Rs 600. Should I wait for my actual price or sell at current market price?

N. Gopalakrishnan

BEML (Rs 318.7): This stock is in a vicious down-trend this year, losing 53 per cent from its March peak of Rs 703. The stock appears headed towards its December 2008 trough at Rs 280.

Investors can hold the stock as long as this support holds. But breach of this level can lead to sharp erosion that takes the stock to Rs 117 or even lower.

Short-term resistances are at Rs 460 and Rs 550.

Medium-term trend will turn higher only if the stock goes on to close above Rs 700. Subsequent target will be Rs 880 and Rs 1,065.

(This article was published on August 4, 2012)
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