The Hindu Business Line : Query Corner

I have observed on quite a few occasions that the share price of the company concerned moves well past the target price mentioned by you. Unichem Labs and Jaiprakash Associates are more recent examples of this aspect. What should investors do in this kind of a situation?

We have addressed a similar question earlier. For the sake of clarity, we would like to take up this issue again. In many a case, stocks would move past our initial target price.

In such instances, conservative investors may sell a portion of their holding and use a trailing stop-loss for the balance. As a rule of thumb, never buy or sell the entire budgeted quantity at a single price level. Investors willing to take risk may employ a trailing stop-loss for the entire holding.

Periodical profit-booking and re-entry on fresh "buy" triggers are crucial aspects of success in stock market investing. There is nothing wrong or inconsistent in buying a stock at slightly higher levels after having booked profit earlier.

The key aspect is to ensure that the long-term trend is intact and there is a valid reason to take fresh exposures.

What is the outlook for Titan Industries? — Kanchan Garg

Titan Industries (Rs 768): After a sharp rally during 2005, the stock has been in a corrective phase in the recent weeks.

Taking into account the momentum behind the earlier rally, the corrective move is likely to be a significant retracement of the earlier upward move. The immediate support is at Rs 720-730.

A close below Rs 715 would indicate further weakness and a possible test of Rs 660-670 may materialise. Shareholders may book partial profits and consider fresh exposures on the evidence of support at lower levels. Stop-loss for long positions may be placed at Rs 730.

Kindly let me have your views on Praj Industries purchased at Rs 125 and Harrisons Malayalam at Rs 108. — B. Subba Naidu

Praj Industries (Rs 109): The corrective phase that commenced at Rs 131 in August 2005 appears to have been completed at the latest low of Rs 80. The subsequent recovery appears to be the start of a fresh leg of an upward move. The stock appears to be headed towards Rs 125-130 in the near term.

A close beyond Rs 130 would help the stock move towards Rs 145-150. Though there is a possibility of a drop to Rs 95-100 in the short-term, such price dips would be an opportunity to buy the stock.

The positive view would be negated on a close below Rs 90. Remain invested with a stop-loss at Rs 90. Fresh exposures may be considered at prevailing levels and on declines, with a stop-loss at Rs 90.

Harrisons Malayalam (Rs 106): A move towards Rs 125-130 appears likely. This view would be valid as long as the stock holds above the stop-loss level at Rs 89. Hold with a stop-loss at this level.

Fresh exposures may also be considered on weakness with a stop-loss at Rs 89. Take partial profits on the evidence of resistance at Rs 125-130 range.

I would like to know the prospects of Marksans Pharma and Asahi India Glass. — R. Vellayappa

Marksans Pharma (Rs.211): There appears to be marginal downside risk from prevailing levels. The share price has been in a major downtrend, which is a correction to the earlier rally that peaked at Rs 398. This corrective phase appears almost complete.

A close above Rs 240 would confirm the completion of the correction and also the start of the next phase of the upward move that may take the stock to Rs 295-300.

The positive view would be intact as long as the stock trades above the negative trigger level at Rs 180.

Asahi India Glass (Rs 94): The long-term trend is positive and the share price could move to Rs 125-130. Remain invested with a stop-loss at Rs 84. Fresh exposures may also be considered on weakness, with a stop-loss at Rs 84. Exposures may be enhanced on a close above Rs 99.

I hold shares of Andhra Bank at Rs 109 and Aftek Infosys at Rs 131.Please advise whether to hold or sell these shares. — E. Kenneth, Burzin Patel, Pina Kothari

Andhra Bank (Rs 105.4): A move towards Rs 125-130 appears likely. Remain invested with a stop-loss at Rs 94. Fresh exposures may be considered now and on declines, with a stop-loss at Rs 94.

A close below Rs 94 would be an early sign of bearishness and a close below Rs 82 would push the stock into prolonged phase of downward correction.

Aftek Infosys (Rs 114.4): Remain invested with a stop-loss at Rs 90 as the long-term outlook is positive. The share price is likely to move to the target zone of Rs 145-150. The positive view would be negated on a close below Rs 90. Fresh exposures may be considered on weakness, with a stop-loss at Rs 90.

What is the short-term outlook for Allahabad Bank purchased at Rs 79.75 and Nicholas Piramal purchased at Rs 295? — Sarath, U.G. Shenoy

Allahabad Bank (Rs 91): After a short-term correction towards Rs 84-86, the stock is likely to resume the upward trend. A move to Rs 108-110 appears likely. This view would be negated on a close below Rs 81. Remain invested with a stop-loss at Rs 81.

Fresh exposures may be considered with on weakness, with the same stop-loss.

Nicholas Piramal (Rs 280): The long-term outlook is positive and the share price appears to be headed towards Rs 355-360. The trend would turn bearish on a close below the negative trigger level of Rs 250. Long-term investors may hold with a stop-loss at Rs 250. Investors willing to wait for a while may consider fresh exposures on declines, with the same stop-loss.

You had given a positive outlook for Cosmo Films a few months ago. Is that view still valid and is it advisable to hold the stock bought at Rs 91? — Jugal Bagga

Cosmo Films (Rs 79): We continue to stand by our earlier bullish view on the stock. The share price appears on course to move to the first target zone at Rs 125-130. Based on the latest price action, a close above Rs 84 would confirm the bullish view. As observed earlier, the positive view would be negated only on a close below Rs 50.

I would like to have your views on Eveready Industries purchased at Rs 137. — S. K.Verma

Eveready Industries (Rs 105.2): The price action has been confined to a trading zone in the recent months. Though the long-term outlook is bullish, the stock might drop to Rs 90-95 shortly.

The long-term uptrend is likely to resume on the completion of the short-term correction.

A close above Rs 120 would indicate the onset of the bullish trend and the stock could subsequently move to Rs 155-160. Hold with a stop-loss at Rs 90. Investors who find this stop-loss too wide for comfort may settle for Rs 99 as the stop-loss.

Kindly let me know the prospects of Rain Calcining. — Vardhan Dharkar, Mahesh

Rain Calcining (Rs 49): The recent price pattern indicates that the short-term outlook is positive. A move to Rs 56-58 appears likely. Hold with a stop-loss at Rs 45.

Fresh exposures may be considered on weakness, with a stop loss at Rs 45. A close below this level would impart bearish trend and would negate the positive outlook.

I am a student of technical analysis. As per my interpretation, Hindalco appears to be tracing out an "Ascending Triangle" pattern and I expect the stock to move on the breakout. Is my assessment correct and shall I buy the stock now? — Piyush Shah, Ramesh

Hindalco (Rs 155): Your case for an "Ascending Triangle" pattern does not appear too convincing. For a triangle pattern to be valid, the price movement should fit neatly into the boundaries of a pair of converging lines, which is not the case in this chart.

An important aspect that needs to be borne in mind is that an technical chart pattern should grab your attention at the first glance and you should never strain to identify one.

The common mistake committed by students of technical analysis is that they try to fit or accommodate a chart pattern to suit their convenience.

The other problem with your interpretation is that when you suspect an Ascending Triangle pattern to be taking shape, the normal expectation would be a drop in price on the completion of the pattern.

Getting back to the outlook for Hindalco, we expect the stock to move to Rs 175-180 shortly. Fresh exposures may be considered with a stop-loss at Rs 143.

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)