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B. Krishnakumar

You had referred to the concept of relative strength comparative index last week. Please suggest some good books or software on the subject. I am interested in studying technical analysis and Elliott wave in particular. — K. Srinivas and Ashok M. Gandhi

The relative-strength comparative index is just one of the tools an investor should possess in the arsenal. Any standard charting software would have this function in built. Besides, there is a wealth of information on the Internet as well. For investors willing to seriously pursue technically analysis, we would advice them to get a copy of either Metastock or Tradestation. Both of them are user friendly and equipped with all the necessary tools/indicators.

We would strongly recommend buying a computer and good charting software before getting started with technical analysis. This would accelerate the learning process and the aspirants will also get a good grasp over the techniques learnt.

As far as Elliott Wave Analysis is concerned, there are two books we would recommend. The first book is authored by Frost and Prechter and titled `Elliott Wave Principle' - Key to Market Behaviour. The other is by Glen Neely titled Mastering Elliott Wave.

Besides, there are several Web sites that have tutorials or a primer on this subject.

We recommend investors visit Web sites such as www.dynamictraders.com and www.elliottwave.com on a regular basis as they contain useful information, analysis and tutorials on the Elliott Wave concept.

I bought Mercator Lines at Rs 98. What is the outlook for the stock and should I hold or sell? — K. Ramesh

Mercator Lines (Rs 94.6): The price is ruling close to the immediate resistance level at Rs 98-101 range.

A move above this range would impart strength and the stock could move to Rs 118-120 range subsequently. The positive view would be valid as long as the stock trades above the stop-loss level of Rs.84.

Hold with a stop-loss at Rs 84 and take partial profits on a move to Rs 118-120 range.

What is the outlook for HCL Technologies bought at Rs 350 and FDC at Rs 60? — Elango

HCL Technologies (Rs 359): The stock could move to Rs 405-408 range in the near-term.

A move past Rs 370 would improve the odds of the stock moving to the target zone. Hold with a stop-loss at Rs 325 and consider partial profit-booking once the stock moves to the price target of Rs 405-408. A drop below Rs 325 would warrant liquidation of holdings.

FDC (Rs 51.5): Though there is a possibility of a short-term rally to Rs 56-58 range, the price is likely decline to the Rs 44-45 range subsequently.

This view would valid if the stock fails to move past the positive trigger level of Rs 62. Remain invested with a stop-loss at Rs 45. A trailing stop-loss may be used after the stock moves to the resistance zone.

Is it advisable to hold or sell Tata Motors purchased at Rs 535 and Mangalam Cement at Rs 98? — K. Kunjithapadam

Tata Motors (Rs 463): There is a possibility of the stock moving past your purchase price of Rs 535. The positive outlook would be valid as long as the share price holds above the negative trigger level of Rs 440.

A move above Rs 478 would impart strength and the stock could move to Rs 535 level. Shareholders may have a stop-loss at Rs 440; fresh investments may be considered on a move above Rs 478, with a suitable stop-loss in place.

Mangalam Cement (Rs 79.9): The recent downward trend does not appear complete. A drop below Rs 76 would indicate that the stock is headed towards lower levels of Rs 65-67 range.

Hold with a stop-loss at Rs 75 for a portion of the holding and at Rs 65 for the balance. If the stop-loss is hit, fresh buying may be considered on a subsequent move past Rs 82.

The long-term trend remains bullish and the stock is expected to resume the upward move on the completion of the anticipated short-term weakness.

I bought at Rolta India at Rs 90. Kindly advice whether to sell or hold this stock. — D. Ganesan

Rolta India (Rs 87.6): The stock has been moving in an upward sloping channel. A move out of this channel would impart momentum to share price in the direction of breakout. Till such time, it would be advisable to stay clear of the stock. Shareholders may have a stop-loss at Rs 79.

Is there any upside potential for Sesa Goa bought at Rs 864? — V. Murugan

Sesa Goa (Rs 842): The stock has seen a sharp upward move in the recent months.

The price action in the recent weeks indicates that the corrective phase is already underway. The stop-loss may be placed at Rs 785. Though the stop-loss may be relatively wide from the market price, it is imperative to have it at this level as the stock is prone to huge intra-day swings. Given the price history and sharp moves in either direction, it may be worth the risk to have the stop at Rs 785. Short-term traders may settle for a stop-loss at Rs 815. If the stop-loss gets triggered, fresh purchases may be considered on a move past Rs 860.

Kindly let me know the future prospects of Indian Card Clothing. — Nikhil Parchure

Indian Card (Rs 179.9): Hold with a stop-loss at Rs 168. The stock is likely to move to Rs 212-215 range shortly. The positive outlook would be threatened if the share price declines below the Rs 165 level. A move above Rs 196 would impart strength and would help the stock seek Rs 212-215 range.

What is the near-term outlook for Cipla and Wipro? — K. Milan

Cipla (Rs 280): Though the short-term outlook is bearish, the stock is likely to resume the long-term upward move when the expected corrective phase is over.

The immediate support for the stock is at Rs 274-276 range.

A close below Rs 271 would have negative implications and could push the stock to Rs 240-245 range. Hold with a stop-loss at Rs 270. Fresh buying may be considered if the support at Rs 274-276 range holds and the stock manages to turn bullish subsequently. The immediate target for the stock is placed at Rs 308-310 range.

Wipro (Rs 697.8): The outlook does not appear positive. A drop to Rs 645-650 range appears likely. A close below the support level at Rs 680 would confirm the weak outlook and would push the stock to the projected target zone of Rs 645-650 band. Remain invested with a stop-loss at Rs 680. Investors willing to take risk may consider short positions with a stop-loss at Rs 720.

You had mentioned that the Nifty would drop to 1350-1400 range. Does this view remain valid after the recent pick-up in momentum and trading volume witnessed since the presentation of the Budget? Investors like me have not been able to capitalise on price rally due to anticipation of corrective phases, which do not materialise or they do so at much higher levels. Could you help me form a long-term view of the current bull market? — K. Milan

We had mentioned earlier that a move above 2130 for the Nifty would impart strength and would help the index move to 2250-2300 range.

The index has also held above negative trigger levels mentioned earlier. We wish to reiterate that the Nifty could move to 2250-2300 range and turn weak subsequently.

The recent chart patterns do not negate the possibility of the drop to 1300-1400 range. This view is, however, based on the conditions and chart patterns that prevail.

We would be forced to revise our view if it is warranted by the price movement and chart patterns in the future. Any significant change in our long-term outlook would be highlighted in these columns.

We also wish to emphasise that investors need to concentrate more on money management. It is imperative to realise that buying or selling of holdings need not be completed at one go. It may be carried out in a staggered manner at different price levels.

It is also not mandatory that all long positions need to be liquidated if the Nifty reaches our target zone. It would always be better to be cautious and alert enough to sense a potential change in direction and act accordingly as and when the index or a stock reaches our target zone.

Readers can send in their queries, on not more than two companies, to techtrail@thehindu.co.in

Queries can also be sent by post to: Tech Trail, 859/860 Kasturi Buildings, Anna Salai, Chennai 600002.

We would endeavour to answer as many queries as possible. However, constraints of space will limit the responses featured under this column.

(Note: 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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