Financial Daily from THE HINDU group of publications
Sunday, Jun 19, 2005
Markets - Technical Analysis
Will it be advisable to enhance exposures when the stock declines so that the average price comes down? Earlier you had mentioned in your column that PNB Gilts will touch Rs 25-27 but it is hovering around Rs 18-19. Kindly advise on the prospects. D.V. Deshpande
It would not be advisable to pursue the concept of "averaging" by buying a stock on declines in order to reduce the overall cost of acquisition. Logically, it amounts to throwing good money after bad. There is no point buying a stock that is falling as the trend in this case is down. It would be a better strategy to wait for the next "buy" signal or a logical entry point to enhance exposures rather buying stocks on declines.
PNB Gilts (Rs 18): The stock has lacked positive momentum and the chances of a rally to our earlier mentioned target zone of Rs 25-27 appear bleak. The recent lack of momentum and the possibility of a drop to the Rs 13-14 range have led to a change in our view on the stock. Investors may reduce exposures at prevailing levels, and more so on rally.
What is your opinion about Finolex Industries and Nagarjuna Fertiliser? Neha
Finolex Industries (Rs 73): The breach of key trigger levels has negated the earlier positive view. Investors may sell a portion of the holdings at prevailing levels and have a stop-loss at Rs 70 for the balance. A close below Rs 72 would result in a drop to the next support level at the Rs 62-64 range. Considering the recent chart patterns, the short-term outlook does not appear promising.
Nagarjuna Fertiliser (Rs 14.6): The stock appears to be heading towards the Rs 10-11 range in the near term. A close below Rs 14.2 would confirm this possibility. Shareholders may have a stop-loss at Rs 14. Fresh exposures may be avoided while intra-day price rally may be used to reduce exposures.
I am holding shares of Wipro, which I purchased at Rs 646 and ITC at Rs 1580. Shall I hold these shares? N.S. Prasanna Kumar
Wipro (Rs 743.6): The outlook is bullish and the stock could move to the Rs 800-810 range. Remain invested with a stop-loss at Rs 710. Fresh exposures may also be considered with a stop-loss at Rs 710.
ITC (Rs 1546): The stock is in a consolidation phase and the uptrend is likely to continue on the completion of this phase. The share price appears to be tracing out a "bullish flag" pattern. A breakout from this pattern would impart bullishness. Hold with a stop-loss at Rs 1450. Partial profit booking may be considered on a move to the Rs 1650-1700 range.
Please let me have your views on Sesa Goa purchased at Rs 790. Geeta, C.N. Jayaram, Rajee, K. Venkataraman
Sesa Goa (Rs 572.6): After a sharp rally during 2004, the stock has been in a major corrective phase in the last few months. The pattern and magnitude of the drop indicates that the corrective phase is likely to last for while. Though there could be a short-term bounce, the chances of a major recovery in share price appear slim at the moment. The long-term trend, however, remains bullish and the stock would get back to new highs past the earlier peak of Rs 882. As the present corrective phase would be of a protracted nature, the resumption of the long-term outlook is not likely to materialise in a hurry. The immediate resistance is placed at the Rs 650-660 range and support at Rs 435-445.
Please give your opinion on TVS Motor. Ishwar
TVS Motor (Rs 70.6): The outlook appears bearish. The stock could drop to the Rs 55-58 range. A break of this range could result in a further drop to the Rs 40-45 range. Use price rally to reduce exposures. There is no point holding this stock if the price patterns and the near-term outlook are any indications. Sell on rally would be an appropriate course of action.
What should I do to my holdings in Punjab Alkalies bought at Rs 54? Shubham
Punjab Alkalies (Rs 57.8): Though the short-term trend appears bearish, the long-term outlook remains bullish. The share price could decline to the Rs 48-50 range in the short-term. Sell at least a portion of the holding and have a stop-loss at Rs 43 for the balance.
What is the outlook for Neyveli Lignite bought at Rs 70? Sreenadhan
Neyveli Lignite (Rs 70.3): The share price has been confined to a narrow trading range. It would be advisable to stay clear of stocks that are not in a trending mode. Staying invested in a stock such as Neyveli Lignite, which is not in a trending mode, would mean locking up of funds and loss of opportunity to earn returns from other stocks. The stock would get into a trending mode if it closes above Rs 80. Till such time, it would either drift sideways within a trading zone or seek lower levels of Rs 60-62. Look to reduce exposures in the stock, as it does not appear to be heading towards higher levels.
I would like to have your opinion on ICICI Bank and SBI. Shray Shikhar
ICICI Bank (Rs 416.2): The near-term outlook is bearish and a drop to the Rs 375-380 range appears likely. A close below Rs 400 would confirm this view. Remain invested with a stop-loss at Rs 400.A close below Rs 350 would have further negative implications for the stock. Look to dilute holdings on price rally.
SBI: The outlook for SBI has been covered in an accompanying story on this page.
Shall I hold or sell Thirumalai Chemicals? Pannaben
Thirumalai Chemicals (Rs 123.4): The stock is in a long-term uptrend. It appears to be headed towards the Rs 145-150 range in the near term. Remain invested with a stop-loss at Rs 110. A close below this level would push the stock to the Rs 80-85 range. A close above Rs 138 would impart strength and would push the stock to the target zone.
A close below Rs 110 would warrant dilution of holdings.
Could you advise whether I can buy Aban Lloyd Chiles and FCI OEN Connectors? A.K. Sengupta
Aban Lloyd Chiles (Rs 420.4): Taking into account the recent price pattern, it would be advisable to defer fresh exposures. The stock appears to be headed towards the Rs 370-380 range. There is no reason to buy the stock now. Existing shareholders may hold with a stop-loss at Rs 370.
FCI OEN (Rs 362.8): The share price appears to be headed towards the Rs 325-330 range. Fresh exposures may be considered at a later date. Shareholders who have entered at lower levels may consider at least partial profit booking, as the stock could seek lower levels.
What is your view on BOC? Subur Basha Shaikh
BOC (Rs 96.3): The near-term trend is bearish and the stock could drop to the Rs 85-88 range. Remain invested with a stop-loss at Rs 93. A close below Rs 93 would push the stock to the Rs 82-83 band. The long-term trend remains bullish. The uptrend would resume on the completion of the anticipated downtrend. Long-term investors may consider exposures on the evidence of support at the Rs 82-83 range.
I bought Monnet Ispat at Rs 180. Kindly let me know the outlook for the stock. Arindam Malakar
Monnet Ispat (Rs 124.2): It is unlikely that you would get an opportunity to exit at levels higher than your entry price. Look to reduce exposures, as the outlook appears bearish. The stock could drop to the Rs 95-100 range shortly. The short-term trend would turn positive if the stock closes above Rs 157.
I purchased SRF at Rs 142 based on an advice in your column. What are its prospects and is it worth holding the stock? Mini Augustine
SRF (Rs 176.8): The stock has moved past the target zone mentioned earlier. The outlook remains bullish and the stock could move to the next target level at the Rs 195-200 range. Hold with a stop-loss at Rs 160. Fresh exposures may be avoided for the moment.
Partial profit-booking may be considered on a move to the target zone.
I have been holdingexposures in G E Shipping and ABB for quite a while now. Please advisece me whether to book profit or remain invested in these stocks. Lalit.V. Sanghavi
G E Shipping (Rs 141): The share price could drop to the Rs 110-115 range in the near term. The recent corrective phase, which commenced in November 2004, does not appear complete as yet. The short-term bearish outlook would be negated if the share price closes above the resistance level at Rs 170. Look to reduce exposures, as there are no signs of recovery in sight.
ABB (Rs 1298): After a decline to the Rs 1100-1150 range, the stock is likely to resume its long-term uptrend. There is no reason to sell the stock now as the long-term uptrend would is likely to take the stock past the Rs 1500 mark. Remain invested with a stop-loss at Rs 1000. Fresh exposures may be considered by long-term investors, with a stop-loss at Rs 1000.
(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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