The Hindu Business Line : Query corner

It is not advisable to hold on to an investment that has suffered erosion in excess of 25 per cent. Investors should try to at least reduce exposures when the stock drops by a predetermined level.

Fresh buying may be considered when the stock reverses direction and triggers a "buy" signal. The outlook for the stock is bearish and a drop to Rs 8.5-9 range appears likely. Hold with a stop-loss at Rs 10.6.

Reduce exposures or use a trailing stop-loss in the event of an upward move.

Kindly advice about my holdings in Welspun Gujarat purchased at Rs 47 and Century Enka at Rs 175. — Ayodhya Prasad

Welspun Gujarat (Rs 35.2): The outlook is weak and a drop to Rs 29-30 range appears likely. Only a close above Rs 40 would warrant a reassessment of the bearish outlook. Hold with a stop-loss at Rs 34 and look for opportunities to reduce exposures.

Century Enka (Rs 132): The short-term outlook appears negative. The stock could decline to Rs 120-122 level. A bearish "head and shoulder" pattern appears to have been completed in the daily chart. This pattern lends credence to the bearish view. Shareholders may reduce exposures. The bearish outlook would be in force as long as the stock trades below Rs 150.

I purchased Nucleus Software at Rs 194 and the stock has ruled weak since then. Should I hold or sell? — M. Sanjay, Vikas

Nucleus Software (Rs 164.4): After a steady upward move, the stock has been on a downtrend over the past few weeks. There are no signs of the completion of this downward move. The price could decline to Rs 145-148 range. Reduce exposures on price rally. Fresh buying may be avoided.

Should I hold or exit Essar Oil bought at Rs 40 and Chambal Fertiliser at Rs 32? — S.S.S.K.Reddy

Essar Oil (Rs 32.5): The share price appears to be headed towards the immediate support level at Rs 26-27 range. Cut exposures and consider accumulation on the evidence of support at Rs 26-27 range. Investors holding profitable position may sell at least a portion of the holding at prevailing levels. Exposures may be reduced further on price rally. The negative outlook would be altered if the stock closes above Rs 39.

Chambal Fertiliser (Rs 28): The near-term outlook is bearish and a drop to Rs 22-23 range appears likely. Hold with a stop-loss at Rs 26 and reduce exposures if the price seeks higher levels.

What is your view on J&K Bank bought at Rs 411 and Natco Pharma at Rs 141? — K. Sujatha

J&K Bank (Rs 341.4): Though the long-term trend is bullish, the stock could seek lower levels in the near term. A drop to Rs 300-305 range appears likely. Hold with a stop-loss at Rs 335. Fresh exposures may be considered on the evidence of support at about Rs 295-300. It would be advisable to reduce holdings now and wait for opportunities to re-enter at lower levels.

Natco Pharma (Rs 126.4): The share price moved up sharply for about six months from July 2004. Following this upward move, the stock is now in a corrective phase. Considering that the corrective phase is in its early stages, there could be further room to be covered on the downside. Sell a portion of the holding now and place a stop-loss at Rs 120 for the rest. Look to trim exposures if the price moves up.

What is the outlook for Allahabad Bank purchased at Rs 100?— S. Srinivas

Allahabad Bank (Rs 93.5): The share price could decline to Rs 84-85 range shortly. Hold with a stop-loss at Rs 90. Fresh buying may be avoided. The bearish outlook would be in force as long as the Rs 108-level is not breached on the upside. Investors with a low risk tolerance may sell a portion of the holdings now and consider re-entry when a "buy" signal is triggered at lower levels.

Is it advisable to buy Ashok Leyland? — L.A. Kumar, Ravindra Singh

Ashok Leyland (Rs 20.5): Though there could be a short-term bounce, the recent downward trend would continue on the completion of the expected short-term uptrend. Hold with a stop-loss at Rs 19.5 as the stock could recover to Rs 22-23 range. Fresh exposures may be considered on evidence of the stock seeking support at around Rs 19.75-20 range.

Exposures may be reduced or a trailing stop-loss may be employed if stock seeks higher levels. Investors willing to take risk may consider long positions at the Rs 19-19.5 range with a close stop-loss in place.

Profit taking may be considered on the evidence of resistance at the Rs 22-23 range.

What should I do to my holding in S.M. Dyechem bought at Rs 9 and IPCA Labs at Rs 450? — G.R.K. Murthy

S.M. Dyechem (Rs 6.2): Reduce holdings, as the stock does not appear to have upside potential. Fresh buying may be considered if the share price closes above Rs 8.4.

For the moment, it would be advisable to cut exposures, as the trend remains bearish.

IPCA Labs (Rs 325): The stock could drop to Rs 295-300 range in the near term. It would be advisable to reduce holdings, as the stock may be hard pressed in moving past your entry price.

What is the outlook for M.M. Forgings bought at Rs 380 (cum bonus) and Harrisons Malayalam at Rs 42? — K. Venugopal

M.M.Forgings (Rs 192.7): The share price could seek lower levels. There is no point holding on to the stock, as there appears to be more ground left to be covered on the downside. Reduce a portion of the holding at prevailing levels and have a stop-loss at Rs 180 for the rest.

Harrisons Malayalam (Rs .69.35): Hold with a stop-loss at Rs 65 and reduce exposures on price upswings. The stock appears to be headed towards lower levels of Rs 57-58. Considering that you are holding a profitable position, it would be advisable to reduce exposures and consider re-entry later.

Kindly explain the likely short-term movement in Syndicate Bank and Oriental Bank? I purchased these stocks at Rs 64 and Rs 359 respectively? — Dilip Aloni

Syndicate Bank (Rs 53.6): There appears to be marginal downside risk from prevailing levels. The stock is ruling close to the immediate support level at Rs 50-51 range.

The share price is unlikely to breach this support range and if it does so, a further decline to Rs 42-45 range may materialise. Remain invested with a stop-loss at Rs 51. Fresh buying may also be considered when the stock drops to Rs 50-51 range. Stop-loss for fresh exposures may be placed at Rs 46.

Oriental Bank (Rs 313.4): The stock has a strong support at Rs 300-305 range. A breach of this level would impart further weakness that could push the stock to Rs 275-280 range. Remain invested with a stop-loss at Rs 300. Try to reduce exposures on price rise.

What is the outlook for Bank of Rajasthan purchased at Rs.74? — V. Ananthapadmanaban

Bank of Rajasthan (Rs 56.4): The stock is likely to seek support at Rs 53-54 range. Hold with a stop-loss at Rs 53 for a portion of the holding and at Rs 50 for the balance. The stock could complete the downward trend shortly and resume the earlier bullish trend.

What is the near-term outlook for ICICI Bank and Tata Steel? — V.P. Srivastava

ICICI Bank (Rs 390.6): The outlook appears bearish and a drop to Rs 355-360 range is likely. Remain invested with a stop-loss at Rs.372.

Risk-averse investors may consider selling a portion of the holdings now and contemplate re-entry on declines. Only a close above Rs 410 would negate the negative outlook.

Tata Steel (Rs 413.1): The share price is perched just above the crucial support level at Rs 400-405 range. A drop below Rs 398 would push the stock to Rs 365-370 range. Remain invested with a stop-loss at Rs 400. Fresh exposures may be avoided. If the stock holds above the stop-loss level of Rs 400, a move to Rs 440-445 range may materialise.

(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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