The Hindu Business Line : Query Corner

I bought Hindustan Construction recently. Please let me know if it is advisable to hold the stock or switch to Larsen and Tourbo from a one-year holding perspective. — Samir Das.

Hindustan Construction (Rs 152): The near-term trend is positive and a move to Rs 168-170 appears likely. This view would be negated on a close below Rs 136. Hold with a stop-loss at Rs 136.

Fresh exposures may also be considered with a stop-loss at Rs 136 and target price of Rs 168. Investors willing to wait for a longer time period may find exit opportunities at Rs 195-200.

Coming to the second part of your question, we favour investment in Larsen & Toubro (Rs 2,203) ahead of Hindustan Construction from a technical analysis perspective. Larsen & Toubro is likely to move to Rs 3,250-3,300 from a long-term perspective. We would suggest switching a portion of Hindustan Construction to Larsen & Toubro.

Exit from Hindustan Construction at Rs 168-170 and invest in the latter at Rs 2,150-2,170 band. Stop-loss for investments in Larsen and Toubro may be placed at Rs 1,850.

What is your view on IDFC? — Ravi, R. Sathiyanarayanan, U.K.Tiwary, Rohan Hegde

IDFC (Rs 69): The insufficient historical data makes it difficult to arrive at a long-term outlook for the stock. From a short-term trading perspective, the trend would turn bearish on a close below Rs 66.

The recent price patterns suggest that the stock is likely to seek support at Rs 67-68 and stage a recovery to Rs 74-75. Investors may hold with a stop-loss at Rs 65.5.

Traders willing to take risk may consider long positions on the evidence of support at Rs 67-98 and a stop-loss at Rs 65.5.

Please let me have your views on Centurion Bank of Punjab and Himachal Futuristic. — Hameed, P. Kumar

Centurion Bank (Rs 24.6): The outlook is positive and the stock could move to Rs 28-29. The view would be valid as long as the stock holds above the crucial support level at Rs 22-23.

A close below Rs 22 would impart weakness and push the stock to Rs 17-18. Hold with a stop-loss at Rs 21.9.

Himachal Futuristic (Rs 19.9): The stock could move to Rs 22-23 in the near-term. The positive outlook would be negated on a close below the stop-loss level at Rs 18.

Hold with a stop-loss at Rs 18. Fresh exposures may be avoided. Use a trailing stop-loss in the event of rally beyond the target zone.

What is your view on BHEL bought at Rs 1,400? Is it advisable to buy Pantaloon Retail? — Alim Abbas

BHEL (Rs 1,847): Taking into account your entry price and the positive outlook, there is no reason to exit at prevailing levels. The stock could move to Rs 1,975-2,000 shortly.

Remain invested with a stop-loss at Rs 1,710. A close below the stop-loss level may result in the onset of a corrective phase.

Pantaloon Retail (Rs 1,678): It will be safer to defer investment decision in the stock, as there is no evidence of the completion of the corrective phase that commenced in September 2005. There is a possibility of a drop to Rs 1,450-1,500.

Fresh exposures may be considered on the evidence of support at this range.

Investors may wait for the Rs 1,750 level to be taken out. This would indicate that the next segment of the upward move is underway.

For the moment, it would be advisable to have a close tab on the price action.

Please let me have your opinion on United Phosphorous and Varun Shipping. — Muneer, R. Priya

United Phosphorous (Rs 282): The outlook is positive and a move to Rs.325-330 appears likely. Shareholders may remain invested with a stop-loss at Rs 263.

Fresh exposures may also be considered on weakness, with a stop-loss at Rs 263.

A close below this level would warrant dilution of holdings, as it would blunt the positive outlook.

Varun Shipping (Rs 78): The long-term trend is bullish. The share price has been on a major upward trend since early 2005. This move does not appear complete.

The stock could move to Rs 92-95 shortly. Considering the positive outlook, investors may hold with a stop-loss at Rs 68. Fresh exposures may also be considered at levels closer to the Rs 70-72 band, with a stop-loss at Rs 68.

What is your view on G.E. Shipping bought at Rs 155? — Chitrang Srivastava, Kashish

G.E. Shipping (Rs 226): The stock is present traded pretty close to the support zone at Rs 218-220. A close below Rs 217 would have bearish implications. The recent patterns indicate that the stock is likely move to Rs 258-260. A close below Rs 217 would negate this view and would warrant dilution of holdings. Shareholders may remain invested with a stop-loss at Rs 217.

What is the outlook for Harrisons Malayalam? — P.V. Xavier

Harrisons Malayalam (Rs 110): The earlier view of rally to Rs 130-135 range remains unchanged. The positive view would be valid as long as the stop-loss level at Rs 88 is not breached.

Investors who have entered at fairly higher levels may settle for a stop-loss at Rs 93. Short-term traders may consider fresh exposures on a test of the immediate support level at Rs 101-102, with a stop- loss at Rs 97 and a target price of Rs 118-120.

What is your view on Subex Systems bought at Rs 397? — Swarnita Raman

Subex Systems (Rs 404): Hold with a stop-loss at Rs 380 as the long-term outlook is positive. The stock could move to Rs 525-530.

This view would be valid till such time the stock trades above Rs 380. Fresh exposures may also be considered on weakness, with the same stop-loss.

If the prescribed stop-loss rate is hit in a particular stock, will it be advisable to take a reverse position and expect reasonable returns on that trade? — Valli Kasi

This is an interesting question. The answer will depend on context in which the stop-loss is hit and the overall trend of the stock concerned.

More often than not, there would be at least a short-term trading opportunity when our stop-loss level is breached. Whether such a `stop and reverse' position should be considered or not would hinge on the price level at which you take the "contra" position and the direction of the longer-term trend. If you can identify a trading opportunity offering an acceptable risk-reward ratio, you may go ahead and execute the trade.

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