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B. Krishnakumar

Kindly advise whether to hold or exit Karnataka Bank bought at Rs 96 and ING Vysya at Rs 170. — S. Senthil

Karnataka Bank (Rs 70): The share price appears to be tracing out a downward sloping "wedge" pattern. If this view is valid, a sharp upside move may be expected on the completion of this pattern. The stock enjoys support at the Rs 62-64 range and faces resistance at the Rs 74-76 range. Hold with a stop-loss at Rs 61. Long positions may be considered if the stop-loss gets triggered and the stock moves past Rs 80 subsequently.

ING Vysya (Rs 149.1): Remain invested with a stop-loss at Rs 142. Price rallies may be used to reduce exposure or push up the stop-loss level. A drop below Rs 142 would impart weakness and push the stock to lower levels of Rs 125-128. At the moment, only a close above Rs 170 would impart strength.

I purchased Nagarjuna Construction at Rs 580 and Sonata Software at Rs 23. What are the short-term prospects for these stocks? — K. Milan

Nagarjuna Construction (Rs 665): Remain invested with a stop-loss at Rs 625. The stock is in a consolidation phase. The stock would have to close above Rs 710 for the resumption of the upward move. On the contrary, a drop below Rs 625 would indicate that the stock is headed to further lows. Investors who feel that the stop-loss is too wide for comfort may sell a portion of the holdings at prevailing levels and have the stop-loss at Rs 625 for the balance holdings.

Sonata Software (Rs 31.1): Taking into account your entry price and long-term prospects, it would be advisable to remain invested with a stop-loss at Rs 28. The near-term trend appears bullish and a move to the Rs 41-42 range appears likely. Fresh exposures may also be considered with a stop-loss at Rs 28. Exposures may be enhanced on a close above Rs 32.5.

What is your view on South Indian Bank bought at Rs 67 and Eastern Silk Industries at Rs 186? — S. Ramanathan, Gurudas Aras

South Indian Bank (Rs 66): After a corrective phase, the stock appears to be in the early stages of the next leg of the rally. This view would be valid as long as the stock holds above Rs 61. Hold with a stop-loss at Rs 61 and exposures may be enhanced on a move past Rs 68. Stop-loss for fresh long positions may be placed at Rs 63.5. The immediate target for the stock is placed at the Rs 78-80 range.

Eastern Silk (Rs 177.9): Though the long-term trend is bullish, there are no signs of the start of the next leg of bullish phase. The stock has been in a corrective phase to the earlier uptrend. The next leg of the upward move is likely to take the stock to the Rs 245-250 range. Remain invested with a stop-loss at Rs 166. If the stop-loss gets triggered, fresh exposures may be considered on evidence of support at the Rs 145-148 range. Alternatively, a close above Rs 197 may be used to take exposures if the stop-loss gets triggered and the stock reverses without dropping to the Rs 145-148 range.

I hold huge quantity of Tata Chemicals bought at Rs 165 and PNB Gilts at Rs 23. What is the long-term outlook for these stocks? Shall I buy now to average to my cost? — Srikanth Matrubai

Tata Chemicals (Rs 155): The long-term outlook is bullish. A classic "cup with a handle" pattern appears to be taking shape in the weekly price chart. The "handle" portion of the pattern is being traced out by prices at the moment. A strong upward move could materialise on the completion of the ongoing consolidation. The stock faces strong resistance at the Rs 175-178 range. A close above this range would be an early indicator of the beginning of a new upward move. Remain invested with a stop-loss at Rs 130. Though this stop-loss may appear wide, it may be worth the risk in this case if the upward potential is taken into account. A close above Rs 178 would help the stock move to the next target zone of the Rs 235-240 range.

PNB Gilts (Rs 18.9): Hold with a stop-loss at Rs 17.5. A drop below Rs 17.5 would push the stock to the Rs 14-15 range. Investors willing to take risk may have the stop-loss at Rs 15.9. There is a possibility of a short-term rally to the Rs 22-23 range. This, however, is subject to the stock holding above Rs 15.9.

Shall I hold or sell Pricol purchased at Rs 50 and Tata Steel at Rs 390? — Mohammed Sajid Anwar, Gurudas Aras

Pricol (Rs 49.7): The share price is at present ruling close to the important support level at the Rs 43-44 range. The stock is likely to drop to the Rs 45-46 range before resuming the long-term upward move. Remain invested with a stop-loss at Rs 43. Fresh buying may also be considered on price weakness with a stop-loss at Rs 43. The immediate resistance is at the Rs 52-53 range. A close above Rs 53 would help the stock move to the Rs 59-60 range.

Tata Steel (Rs 381.3): The outlook does not appear bullish. A drop to the Rs 322-325 range is not ruled out. A close below Rs 370 would be an early indicator of the drop to the above-mentioned range. Hold with a stop-loss at Rs 370. Exposures may be reduced on price upmoves and on the evidence of resistance at the Rs 410-412 range.

I bought Vijaya Bank at Rs 66. Kindly suggest me the short-term outlook and please advise whether to hold or sell. — Shakti Kumar

Vijaya Bank (Rs 64.4): The stock is hovering close the support level at Rs 61-62. A drop below Rs 60 would impart weakness and could push the stock down to the Rs 46-48 range. Hold with a stop-loss at Rs 60 and employ a trailing stop-loss in the event of an upward move.

What is the outlook for Bank of Punjab bought at Rs 14? — Bhuvana Raghunathan, Jayanti Varma

Bank of Punjab (Rs 32.1): There is a possibility of a rally to the Rs 36-37 Range. A portion of the holdings may be sold when the price reaches this zone. For investors who have entered at lower levels, it would be advisable to remain invested with a stop-loss at Rs 27. Investors who have entered at higher levels and willing to take risk may also settle for this stop-loss. Else, the stop-loss may be placed at Rs 30.5.

How does one fix the stop-loss for a particular stock? Is there any standard formula or percentage to arrive at it? — Bhuvana Raghunathan

The subject of stop-loss is such an important and vast area that its significance cannot be condensed to the confines of a few columns in a newspaper. Fixing of stop-loss would, to a major extent, be governed by psychological factors. If the investor concerned is a person who is "profit seeking' in nature, the stop-loss may be placed at a slightly lower level in relation to a person who is "pain averse" in nature.

Besides, stop-loss also depends on the kind of trading frame that the investor wishes to deal in. Long-term traders may settle for a slightly lengthier stop-loss level while a short-term trader needs to have it at a more aggressive level. On the issue of various approaches to stop-loss level, investors can choose from Fibonacci retracements, volatility-based stops, swing highs/lows and moving averages.

The success rate in trading or investment may be enhanced if the analysis and stop-loss levels are carried out in the time frame that is one step higher than the time frame in which the investor prefers to trade. For example, if the investor feels comfortable trading off the daily charts, analysis and stop-loss levels may be arrived based on the study of weekly charts, which is one time frame higher than the trading time frame. Similarly, traders who prefer taking intra-day positions may concentrate on daily price chart for analysis and arriving at stop-loss levels.

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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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