The Hindu Business Line : Query corner

VBC Ferro (Rs 120): Time and again we get to see investors holding on to their investment even after the share price has dropped considerably from their purchase price.

The basic principle of investing is that if you take care of losses, profits will take care of themselves.

Always try to cut losses; once you let your losses run beyond the threshold limit of comfort, it will always be tough to reduce exposures subsequently as the psychological factors will be a stumbling block.

Coming to VBC Ferro, though the stock has fallen sharply from your entry price, there appears to be marginal downside risk from prevailing levels.

The price patterns indicate that the recent downtrend appears almost complete. A close above Rs 135 will confirm this view and will help the stock move to Rs 175-180.

Considering these factors, it will be worth the risk to hold with a stop-loss at Rs 109.

Fresh exposures may be considered by those willing to take risk. Stop-loss for all long positions may be placed at Rs 109.

What is your view on Pricol and FDC? S.K. Kapur, Himanshu, Sunil, M. Praveen, M.G. Seshadri

Pricol (Rs 40): After a steady uptrend during 2004, a bearish trend prevailed last year. The downward move from the high of Rs 62 appears to be a correction to the rally witnessed in 2004.

There appears to be marginal downside risk, as the corrective phase appears almost complete. The stock enjoys a strong support at Rs 36-37 range.

The next leg of the upward move is likely to commence on the completion of the present correction. A move to Rs 45-50 appears likely in the near- term. Shareholders may hold with a stop-loss at Rs 35. Fresh exposures may also be considered at lower levels, with a stop loss at the same level.

FDC (Rs 51): The short-term outlook is positive and a move to Rs 62-65 appears likely. The price action on Friday resulted in the completion of a bullish `key reversal day' pattern.

The occurrence of this pattern at a crucial support level suggests that the stock has completed the recent downtrend and the next leg of uptrend could resume shortly.

A close above Rs 52 will be an early indicator of the resumption of the uptrend. Remain invested with a stop-loss at Rs 48.

I purchased Nava Bharat Ferro Alloys at Rs 44 and ITI at Rs 72. Please let me have your views on these two stocks and also let me know whether I can accumulate more of these stocks at prevailing levels. C. Sumathi

Nava Bharat Ferro Alloys (Rs 45.7): The share price appears on course to move to the target zone of Rs 59-60 mentioned in the edition dated January 22. Though the share price moved within the striking distance of this target zone, it reversed direction at Rs 55.

The recent price action has not negated the earlier positive view. The chances of a rally to Rs 59-60 will be valid as long as the stock holds above the stop-loss level of Rs 40.

Hold with a stop-loss at Rs 40. Fresh exposures may be considered at prevailing levels as well as on declines, with a stop-loss at Rs 40.

ITI (Rs 70): Though the long-term outlook is positive, there are no signs of the completion of the downward corrective phase that the stock has been confined to in the recent weeks. There is a possibility of a rally to Rs 82-85. This view will be negated on a close below Rs 67. Remain invested with a stop-loss at Rs 67. Fresh exposures may be considered at current prices, with the stop-loss at the same level.

What is the short-term outlook Essar Shipping purchased at Rs 22? K. Guha

Essar Shipping (Rs 28): The stock has been stuck in a trading zone in the recent weeks. A close below Rs 24 will have bearish consequences while a move past Rs 31 will help the stock seek Rs 38-40. Remain invested with a stop-loss at Rs 22. Fresh exposures may be avoided. Reduce exposures on the evidence of resistance at Rs 38-40.

What is the outlook for Shasun Chemicals bought at Rs 99? — A. Mahendran

Shasun Chemicals (Rs 97): The share price is struggling to move past the crucial resistance level at Rs 104-106. A close above Rs 106 will be an early indicator of the start of the next leg of the upward move and a close above Rs 111 will lend weightage to the possibility of a rally to Rs 125-130.The trend will turn bearish on a close below the stop-loss level at Rs 93.

Hold with a stop-loss at Rs 93, while fresh exposures may be considered with a suitable stop-loss on a close above Rs 111.

We will like to have your comments on Narmada Chematur bought for Rs 40 and Aftek Infosys bought for Rs 106 respectively. — Umashankar Sharma, Garuav Jhanwar, Jitendra Shah

Narmada Chematur (Rs 37): The short-term outlook is positive and a move to Rs 43-45 appears likely. Remain invested with a stop-loss at Rs 34. Fresh exposures may be considered on weakness, with a stop-loss at Rs 34. Dilute exposures if the stock faces resistance at Rs 43-45.

Aftek Infosys (Rs 91): A close below Rs 80 will push the stock to Rs 65-68. Shareholders may remain invested with a stop-loss at Rs 80 and reduce exposures on uptrend. At the moment, it will require a close above Rs 105 to reinstate the bullish trend.

What is the outlook for Gujarat NRE Coke? I also request you to start a column explaining the basics of Elliot Wave theory. — Parth Bahl

Gujarat NRE (Rs 94): Though there is a strong case for the stock to have completed the downtrend at the recent low of Rs 80, it will be safer to wait for confirmation. A close above Rs 104 will indicate that the stock is in the early stages of a new upward move. On the contrary, a close below Rs 79 will indicate that the stock could continue the downtrend and seek support at Rs 69-72 range. Going by the recent price action, we favour the view of a completion of the corrective phase and it will be worthwhile to consider long positions at prevailing levels and on weakness, with a stop-loss at Rs 79. Take partial profits if the stock faces resistance at Rs 120-125.

We are planning to introduce a new column that will discuss basic concepts in technical analysis with real time examples from Indian stock market. We will also try to accommodate the basics of Elliott Wave theory in this column.

I purchased Rana Sugar at Rs 43.8 and Tata Tea at Rs 970. What is the outlook for these stocks? — Shrikant, Satish S. Kkhadke, Nitin R. Kolhe, Kulwant Singh Nagpal

Rana Sugar (Rs 36): It will be better to sell a portion of the holdings at prevailing levels as the near-term outlook does appear positive.

A drop to Rs 27-28 appears likely. This view will be negated on a close above Rs 42.

Stop- loss for long positions may be placed at Rs 32. Fresh exposures may be avoided for the moment.

Should I hold or sell 3i Infotech bought at Rs 185? — T. Raveendran, A.K. Sinha

3i Infotech (Rs 172): The stock is ruling close to its crucial support level at Rs 168-169. A close below Rs 168 will have negative implications. Hold with a stop-loss at Rs 168. Fresh exposures may be considered on a close above Rs 176, with a stop-loss at Rs 168. Reduce exposures on a close below Rs 168.

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