I am holding Steel Authority of India bought at Rs 140. Please advise at which rate I can average the same?
Steel Authority of India (Rs 78.4): We do not advise averaging since it mostly results in multiplying the loss. A loss-making position should be cut if the investor does not have the holding power and fresh purchases can be made after the stock has corrected sufficiently.
That said, SAIL is nearing a key long-term support zone between Rs 55 and Rs 70. Since the stock halted its long-term decline from the 2007-peak at this base, investors with long-term perspective can purchase the stock in this zone with stop at Rs 50. Fresh purchases should, however, be avoided on a decline below Rs 50.
Medium-term resistances are at Rs 145 and Rs 190. Inability to move beyond Rs 145 will mean that the stock will remain in a downtrend.
Can I buy Monsanto India and Ingersoll-Rand at current market price?
Monsanto India (Rs 662): Monsanto is currently in a long-term downtrend.
The stock is currently halting at its psychological support at Rs 600. If this level is breached, the stock can head towards the next supports at Rs 571 and Rs 540.
Investors with a greater penchant for risk can buy the stock at current levels with stop at Rs 590. Others can wait for a decline to Rs 540 before buying with stop at Rs 520.
Reversal from these levels will take the stock higher to Rs 790 or Rs 800 in the medium-term. Investors who are not in the stock for the long-haul can exit at these levels. Targets on a move above Rs 800 are Rs 865 and Rs 930. Long-term trend in the stock will turn positive only on a close above Rs 930.
Ingersoll-Rand (Rs 464.1): This stock has been defying the broader market correction over the last two years, moving in a broad trading band between Rs 380 and Rs 560. The stock is currently positioned at the mid-point of this trading range. It could find it difficult to move beyond Rs 560 just yet. But investors with short- to medium-term perspective can buy the stock at current juncture with stop at Rs 425.
Long-term investors can buy the stock with a deep stop-loss at Rs 330. Although the stock appears set to struggle with the resistance band between Rs 500 and Rs 550 for some more time, target on a break above Rs 560 is Rs 735.
Please advise me on the medium- and long-term prospects of shares of A2Z Maintenance and Engineering Services purchased at Rs 250 and Welspun Corp purchased at Rs 158. Can I average by purchasing more?
A2Z Maintenance and Engineering Services (Rs 59.2): This stock has been moving only one way since its listing in December 2010 at Rs 500 — down. Since you have already lost 80 per cent of your investment, it is not recommended to average at these levels.
It is hard to predict where this downward spiral will halt and the stock could even descend to sub-Rs 10 level.
The best recourse would be to sell the stock and switch to some other stocks with stronger growth prospects. Averaging only prolongs the mental trauma.
That said, the short-term prospects will improve only on a close above Rs 100. The medium-term trend will turn positive on a close above Rs 150.
Welspun Corp (Rs 102.8): The trends along all time frames — long, medium and short — are down in this stock. It seems to be heading towards the supports at Rs 65 and Rs 45. Investors can consider buying the stock close to these supports with a tight stop-loss.
Welspun Corp faces stiff resistance at Rs 150 and Rs 210 over the medium-term. Investors with short- to medium-term perspective can exit the stock at either of these levels. Key long-term resistance for the stock is at Rs 300.
I am holding shares of Canara Bank for the past three months. Please let me know whether I can hold these shares for three more months or exit.
Canara Bank (Rs 322.5): Since you appear to be a medium-term investor, it would be best to exit Canara Bank at this juncture. The stock is well below its critical long-term support at Rs 410. It has also declined below the December 2011 trough at Rs 341 thus establishing the sequence of lower peaks and troughs that denotes that the downtrend that began from the peak of Rs 844 is still in motion.
The stock could decline to the support at Rs 235 if the Rs 300 level is breached. Next support is the 2009 trough at Rs 144.
Resistances, in the event of a rally, would be at Rs 410, Rs 510 and Rs 566. Strong close above Rs 566 is required to signal that the medium-term outlook for the stock has turned positive.
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