The Hindu Business Line : Query Corner

NDTV (Rs 214.1): The outlook is bullish and the stock could move to Rs 245-250 shortly. This view would be invalidated on a close below Rs 199. Fresh exposures may also be considered on weakness, with a stop-loss at Rs 199.

A close below Rs 199 would warrant dilution of holdings as the stock could slide to Rs 180-185 subsequently.

Please furnish your views on Cummins India and J.B. Chemicals. — Ramesh Gurbani

Cummins India (Rs 224.1): Though the long-term outlook is positive, the stock is likely to get into a corrective phase shortly.

The next leg of the uptrend is likely to get underway after the completion of the anticipated short-term correction.

The immediate support level for the stock is placed at Rs 205-210.

Investors may hold with a stop-loss at Rs 199. Fresh exposures may also be considered on declines, with the same stop-loss.

J.B. Chemicals (Rs 125): The outlook is positive and a move to Rs 145-150 appears likely. Remain invested with a stop-loss at Rs 105.

Price weakness may be used to enhance exposures with the same stop-loss.

Investors willing to wait for a longer time frame may find opportunities to exit at Rs 205-210.

The positive view would invalidated on a close below Rs 105.

In quite a few instances, the stop-loss suggested by you is relatively wide in relation to the prevailing market price. Should one wait for the entry near stop-loss level in such cases? It is requested to suggest the entry price more specifically in subsequent weeks if there is a case to do so. — V. Chandrasekaran

Quite often, our stop-loss levels tend to be relatively wide.

This is, however, unavoidable in certain cases when the price tends to commence a move in the early part of the week and by the time we publish the recommendation at the end of the week, the price tends to run away a sizeable distance from the preferred stop-loss level.

We are, however, working out strategies to identify the inflexion point at the earliest so that the stop-loss is not too wide and investors get to capture a bigger slice of the upside potential.

In the meanwhile, investors may also look for buying opportunities if prices turn weak and may take exposures at lower levels.

We will also try to suggest better entry levels in the subsequent weeks after the stock has been recommended, if there is a case to do so.

You have mentioned quite often that the earlier trend is cancelled once the stop-loss gets triggered. Would the target mentioned earlier be still valid, if the stock manages to recover ground and get past the stop-loss that was breached earlier? — Sudhin Bathija

We would like to correct your misconception of the implication of the breach of a stop-loss level.

Once the stop-loss is breached, it would negate the earlier recommendation, but would not necessarily result in a reversal of the earlier trend or invalidate the possibility of a rally to the target zone.

On quite a few occasions (KCP and Sakthi Sugars in particular), the stock has breached the stop-loss level and has subsequently managed to move past it and also way above the target zone mentioned by us.

Investors should take investment decision as and when a fresh "buy" signal is triggered. They should not be constrained or upset by the losses suffered in the same stock on an earlier occasion.

Each trade should be viewed as a fresh opportunity to make money and trying to link it with an earlier losing trade should be avoided.

So, if there is a new buy signal after the stop-loss is breached, investors may consider long positions and in most of the cases, our earlier target price would be achieved.

Should I continue to hold or exit from Eastern Silk? — M.G. Kapoor

Eastern Silk (Rs 237): The stock is ruling close to the crucial support level at Rs 222. A close below this level could result in a fall Rs 190-195.

The long-term outlook, however, remains bullish and a move to Rs 295-300 appears likely. This view would not be negated on a close below Rs 222.

It would only delay the eventual move to the target zone. Investors may hold with a stop-loss at Rs 221.

Sell a portion of the holding on a drop below this level and look to re-enter on the evidence of support at Rs 190-195.

I bought Ind-Swift Labs at Rs 175 and Omax Auto at Rs 150. Kindly suggest what I do with my holding in these shares? — Radhakrishnan

Ind-Swift Labs (Rs 144): The recent downtrend appears to be on the verge of completion.

A significant upward move would get underway on the completion of the downtrend that the stock is currently in.

This downtrend is likely to be arrested in the Rs 130-135 zone. Investors may settle for a stop-loss of Rs 130.

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

As long as the stop-loss at Rs 130 is not breached, there will always be a chance of a rally to Rs 235-240.

Omax Auto (Rs 148.3): We continue to remain bullish on this stock. A move to Rs 195-200 appears to be on the cards. This view would be negated only on a close below Rs 130. Hold with a stop-loss at this level.

I would like to have your views on Chemplast Sanmar bought at Rs 95 and Aditya Birla Nuvo at Rs 740? — N.Govindan

Chemplast Sanmar (Rs 88): The share price movement in the recent weeks has been marked by a high degree of volatility. This kind of a price movement indicates that the stock is in a corrective phase and not in a trending mode.

The near-term outlook is bearish and there is a possibility of a drop to Rs 72-75. This view would gain validity if the stock closes below Rs 84. Only a close above Rs 95 would reinstate a positive trend. Shareholders may remain invested with a stop-loss at Rs 84. Fresh exposures may be avoided. Use a trailing stop-loss in the event of a rally towards the resistance zone at Rs 94-95.

Aditya Birla Nuvo (Rs 736): The long-term outlook is positive and a move to Rs 795-800 appears likely. Hold with a stop-loss at Rs 700. Fresh exposures may be considered on weakness, with the same stop-loss. A close below Rs 700 would indicate that the stock is in a relatively longer phase of correction and the next leg of the uptrend would get delayed.

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)

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