The Hindu Business Line : Query Corner

S. Kumars Nationwide (Rs 54.4): The stock has been consolidating over the past couple of weeks. The earlier corrective phase from the high of Rs 65 appears to have been completed at the recent low of Rs 38.

The stock appears to be headed towards Rs 72-75. This view would be negated on a close below Rs 48.

Shareholders may hold with a stop-loss at Rs 48. Fresh exposures may also be considered at prevailing levels, with the same stop-loss.

Shall I hold or exit from Usha Martin bought at Rs 209.6 and Century Enka at Rs 251.3? — A.R. Narasinga Rao, Santosh, Tarak Rao

Usha Martin (Rs 168.4): There appears to marginal downside risk from prevailing levels. The share price has been in a sideways corrective mode and the long-term uptrend is likely to resume on its completion.

There is a possibility of a recovery to Rs 225-230. This view would be invalidated on a close below Rs 140.

Stop-loss for long positions may be placed at Rs 139. A close above Rs 180 would indicate the resumption of the upward move.

Century Enka (Rs 220): After hitting a high of Rs 277 in September 2005, the stock has been in a major corrective phase. This move appears to have been completed at the recent low of Rs 207.

The subsequent recovery would qualify as the first segment of the next leg of an upward move. If this assessment is valid, the stock could move to Rs 295-300.

The positive view would be negated on a close below the stop-loss level of Rs 200.

Fresh exposures may be considered at prevailing levels and on declines, with a stop-loss at Rs 200.

We hold shares in Four Soft at Rs 74 and Phillips Carbon Black at Rs 80. Please advise whether to hold or sell these stocks. — J. Shanthi, R. Sujatha

Four Soft (Rs 74.1): The stock dropped from a high of Rs 106 to Rs 54 and has recovered ground since November 2005. It is not clear if the recovery from this low is just a correction or the start of a new upward move. A move past Rs 85 would indicate that a new leg of an upward move has commenced. The stock could move subsequently to Rs 105-110. On the other hand, a close below Rs 68 would indicate that the downward move is not over and the share price could target Rs 52-55. Shareholders may remain invested with a stop-loss at Rs 68. Fresh exposures may be avoided.

Phillips Carbon (Rs 73): Taking into account the recent chart pattern, it would be advisable to reduce exposures. The recent downward move does not appear complete and the stock could drop to Rs 55-58. Sell a portion of the holdings now and have a stop-loss at Rs 69 for the balance. Investors willing to take risk may remain invested with a stop-loss at Rs 69.

Please let me have your views on Eicher bought at Rs 156 and Essar Steel at Rs 62. — Arvind N. Shanbhag

Eicher (Rs 91): The downtrend that has been prevalent in the recent months appears to be complete. The stock is likely to stage at least a pullback rally towards Rs 140-145. Hold with a stop-loss at Rs 80 for a portion of the holding and at Rs 72 for the balance.

A close above Rs 103 would lend credence to the view of a rally to Rs 140-145. Investors willing to take risk may consider exposures at prevailing levels with a stop-loss at Rs 80. Exposures may be enhanced with a suitable stop- loss, on a close past Rs 103.

Essar Steel (Rs 42): Though the possibility of a rally past your cost price appears remote, the stock could recover to Rs 50-52 shortly. This view would be negated on a close below Rs 38. Hold with a stop-loss at Rs 38. Fresh exposures may be avoided. Use a trailing stop-loss in the event of a move past the target zone.

You had recently mentioned that Praj Industries could move to Rs 125-130 and Kotak Bank to Rs 260-270. Both the stocks have ruled weak recently. Please advise whether to hold or exit. — Shantha Parmesh

Praj Industries (Rs 119): The stock went within the striking distance of our target zone on Friday. After moving to a high of Rs 122, it turned weak.

The short-term outlook remains positive and a move past the target zone of Rs 125-130 appears likely.

There is no need to panic as the trend is bullish. The outlook would warrant a re-look only on a close below Rs 104.

Conservative investors may hold with a stop-loss at Rs 111. The rest may settle for Rs 103 as their stop-loss.

Kotak Bank (Rs 230): The recent price pattern has not affected the positive outlook. We continue to favour a move to Rs 265-270 as the preferred view. A close below Rs 218 would blunt this view.

Investors may hold with a stop-loss at Rs 218. Fresh exposures may also be considered on weakness, with a stop-loss at Rs 218.

Should I hold or sell my exposures in Ind-Swift Labs and Eastern silk? — V. Muralikrishna

Ind-Swift Labs (Rs 170): The stock has been an underperformer in relation to the broad market indices. Since topping out at Rs 297 in December 2004, the stock was in a major corrective phase throughout 2005.

This corrective phase appears complete and the next leg of the upward move appears to be underway.

If this assessment is valid, the stock could move past Rs 300-310 range.

A close below Rs 135 would indicate that the earlier corrective phase is incomplete and the rally towards Rs 300-310 would get delayed. Long-term investors may hold with a stop-loss at Rs 135. Fresh exposures may also be considered on weakness, with the same stop-loss.

Eastern Silk (Rs 253): Hold with a stop-loss at Rs 230 as the near-term outlook is positive. As long as the stock holds above this level, the positive view and a rally to Rs 295-300 would be valid. Fresh exposures may also be considered on weakness, with a stop-loss at Rs 230.

Kindly explain how to arrive at bearish or bullish trigger levels for the index or a particular stock. — Manna

Though the question per se may appear simple, answering it would quite a task. Though we would try to address your query, the constraint on space and the diverse nature of the topic makes it quite a difficult task to cover all aspects of the subject.

Simply put, the bullish or bearish trigger levels that we provide are nothing but stop-loss levels. We have a unique system of identifying a stop-loss level that act as barrier to the prevailing trend. Once that barrier is broken, the earlier trend gets negated and the share price typically accelerates on the direction of the breakout. There are quite a few basic techniques to identify such trigger levels. The recent swing high or low could be an effective trigger level. Moving averages or trendlines that have proved effective in the past may also be used as trigger levels. Though there are other methods as well, we feel a basic understanding of these two concepts would be good enough for a start.

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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.

(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)