Financial Daily from THE HINDU group of publications
Sunday, Nov 07, 2004
Markets - Technical Analysis
Matrix Lab has announced bonus and stock split. Is it advisable to buy the stock now at or enter after it turns ex-bonus? What is the outlook for GE Shipping? Arunachala Rao & M. Ramabhadran
Matrix Lab (Rs 1794): As long as the original trend is valid, it would make no difference if you buy the stock now or after it turns ex-bonus. The outlook for the stock is positive. The share price could move to the Rs 1920-1950 range. A drop below Rs 1700 would be a negative trigger; this would delay the expected move towards the target zone. Stakeholders may remain invested with a stop-loss at Rs 1700 for a portion of the holding and at Rs 1580 for the balance. Fresh buying may be considered on price weakness, with a stop-loss at Rs 1580. Investors need to be cautious while trading in stocks of this genre as there is a risk of the price dropping below the stop-loss level without the stop-loss getting triggered. This is a possibility on account of the sharp fluctuations between price ticks.
GE Shipping (Rs 169.8): After a rally from the low of Rs 84 recorded in May to the recent high of Rs 183.5, the stock appears to be in a corrective phase now. There appears to be scope for one more leg of an upward move that could take the share price to the Rs 190-195 range. This expected upward move would take shape when the ongoing correction is complete. Hold with a stop-loss at Rs 155. Those willing to take fresh exposures may wait for the share price to move above Rs 179, with a stop-loss at Rs 160.
I bought SBI at Rs 464 and Allahabad Bank at Rs 49. Shall I hold these stocks or exit? V. Ananthapadmnaban & Pradeep
SBI (Rs 498.5): The near-term trend appears positive and the share price could move to the Rs 545-550 range. This view would be valid as long as the share price stays above Rs 468. Hold with a stop-loss at Rs 468 and use price declines to add exposures. A drop below Rs 468 would warrant dilution of holdings and a close below Rs 435 would impart further weakness.
Allahabad Bank (Rs 48.9): The stock could move to the Rs 58-60 range in the near term trend. Technically, there is no reason to sell this stock now. Either partial profit booking may be considered or the stop-loss may be brought closer to the market price as and when the stock moves to the target zone of Rs 58-60. Fresh buying may also be considered on a move above Rs 50. Stop-loss for all long positions may be placed at Rs 41.
I have shares of Moser Baer bought at Rs 280. What is the outlook? Biju Philip
Moser Baer (Rs 193.7): Based on the price patterns in the daily and weekly charts, it would be a tough task for the stock to move towards your purchase price. After a short-term drop to the Rs 160-165 range, the stock is likely to stage a recovery. It would be advisable to sell a portion of the holdings at the prevailing market rates and retain the balance with a stop-loss at Rs 188. A trailing stop-loss may be employed if the price moves to higher levels.
What is the outlook for TVS Motor bought at Rs 86? Debjyoti Majumdar
TVS Motor (Rs 77.9): The outlook for the stock appears weak. A re-test of the recent low of the Rs 57-58 range appears likely. At the moment, only a move past Rs 90 would impart bullish momentum. Hold with a stop-loss at Rs 72 and use price rally to trim holdings
What is the outlook for Ucal Fuel? Is it advisable to buy it at prevailing levels? Shall I hold or exit Kochi Refineries bought at Rs 203.40? Valli Kasi
Ucal Fuel (Rs 193): There is no evidence to suggest that the recent downtrend is complete. The recent chart patterns do not rule out the possibility of a drop to the Rs 165-170 range. Investors willing to take exposures may buy a portion of the budgeted quantity at present rates and use price dips to enhance holdings as the stock could move to the Rs 235-240 range. Stop-loss for long positions may be placed at Rs 155.
Kochi Refineries (Rs 211.9): The near-term outlook is positive. The stock could move to the Rs 230-235 range. Hold with a stop-loss at Rs 190. Fresh buying may also be considered with a stop-loss at Rs 198.
I would like to know prospects of Tata Motors purchased at Rs 400. Vikas Malpani
Tata Motors (Rs 420.8): Only a move past Rs 440 would impart strong bullish momentum. The stock is currently stuck in a narrow trading zone. The share price is yet to get into a trending phase. A meaningful trend is unlikely to emerge only if the stock gets back into a trending mode. Hold with a stop-loss at Rs 370. A move past Rs 440 may be used to take fresh long positions with a suitable stop-loss in place.
I purchased Unichem Labs.at Rs 212 & Indo Gulf Fertilisers at Rs 104. Can I expect them to move up? Vivek Sindhwani & S.V.Mohan Rao
Unichem Labs (Rs 199.7): The long-term outlook for the stock appears positive. The stock could move to the Rs 245-250 range. Stop-loss for long positions may be placed at Rs 184. If the stop-loss is breached, the stock could drop to the Rs 172-175 range. The long-term uptrend would, however, commence after the completion of the downtrend. Fresh buying may be considered on a move past Rs 210, with a stop-loss at Rs 194. If the stop-loss at Rs 194 gets breached, fresh buying may be considered on evidence of support around the Rs 172-175 range.
Based on your recommendations, I recently bought BEML at Rs 235. What is the outlook for this stock? Sathiyanarayanan
BEML (Rs 259.2): The stock has moved past the price targets mentioned in earlier weeks. The stock still has upside potential and a move to the Rs 272-275 range. Hold with a stop-loss at Rs 235. Partial profit booking may be considered if the stock faces resistance at the Rs 272-275 range.
What is the outlook for Federal Bank in the light of very poor results for the second quarter? Vijay
We wish to reiterate that the views furnished in this page are based only on the basis of the historical price movement of the stock concerned. The basic premise of technical analysis is that the price movement tends to capture and reflect the cumulative impact of fundamental and extraneous developments. We, therefore, do not attach much importance to developments, fundamental or otherwise, while furnishing views on this page.
Federal Bank (Rs 347.2): The outlook for the stock is positive. The stock could move to Rs 370-375 range. Only a drop below Rs 305 would negate the bullish outlook. Hold with a stop-loss at Rs 305. Fresh buying may also be considered with a stop-loss at Rs 330.
Please help me decide whether I should buy/hold/sell Andhra Bank bought at an average price of Rs 49 and Dr. Reddy's Lab at an average price of Rs 955. Ravi
Andhra Bank (Rs 55.2): Taking into account the positive outlook and your purchase price, it would be advisable to remain invested with a stop-loss at Rs 50. Considering that you hold a reasonably huge quantity, a portion of the holding may be sold if the stock faces resistance at the Rs 58-60 range.
Dr.Reddy's Labs (Rs 774.7): Based on the queries that we have received, it is surprising to notice the high level of investor's tolerance towards losing trades. There is no point holding on to a stock that is losing ground. The genesis of the mistake lies in the investor's psychology. Those holding on to a losing investment must realise that they are also missing out on numerous other profitable opportunity/trades by locking up their investment in the losing trade. By closing the position at the pre-determined stop-loss level, the investor has the option of switching to another stock that could turn out to be a profitable trade.
As far as Dr.Reddy's is concerned, there are no signs of emergence of a bullish trend. Though the stock has recovered ground from the low of Rs 650, there is nothing to indicate that the stock could get towards your entry price. A move past Rs 800 might impart strength. Hold with a stop-loss at Rs 720.
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We would endeavour to answer as many queries as possible. However, constraints of space will limit the responses featured under this column.
(The analysis and opinion expressed in these columns are based on the technical analysis of the past price behaviour. Opinion and price targets are based on the Elliott Wave Analysis. The stop-loss level provided with the recommendation is important. The original view would stand negated if the stop loss level is breached. There is a risk of loss in trading)
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