The Hindu Business Line : Query Corner

I have purchased shares of Kale Consultants at Rs 125 in April 2006. After 10 months, it is still at Rs 126. Kindly let me know the technical outlook for this company. Trilok Bharti

Kale Consultants (Rs 128.2): During the period in which you were holding on to this stock, the price plunged to a low of Rs 76 and then made a very smart recovery recouping all the losses that it suffered in the May crash. The stock is moving in a broad channel between Rs 80 and Rs 140 since September 2005. The price is currently hovering near the upper boundary of this channel.

A breakout beyond Rs 150 can make the price rally to Rs 180 or Rs 200. Hold the stock with a stop at Rs 115. Fall below Rs 115 can drag the price lower to Rs 105 or towards the lower boundary of the channel that exists at Rs 88.

Please advise on the short-term trend of Mercator Lines. N. S. Navandar, Rajendran

Mercator Lines (Rs 50.5): Mercator Lines has made a sharp push from the low of Rs 32.3 at the end of December, to reach the Rs 50 levels. There is intermediate resistance at Rs 50. A breakout beyond Rs 50 is required to take the price to Rs 57 and then Rs 64. Book partial profits at current levels if the price fails to cross Rs 50 over the next two weeks. Hold the rest with a stop at Rs 43.

I would like to know if I can enter Asian Electronics and Opto Circuits at these levels. What are the targets for these two shares? Vinod

Asian Electronics (Rs 570.1): Asian Electronics has reversed from the low of Rs 413 hit on December 22, 2006 and has recorded a steep move upwards to Rs 586. The stock faces considerable resistance in the zone between Rs 570 and Rs 590. Wait for the price to close firmly above Rs 600 before taking exposure in this stock. A breakout past Rs 600 can take the stock to Rs 717. The stop can be kept at Rs 570.

Opto Circuits (Rs 304.9): Opto Circuits is in a strong intermediate term up-trend. The recent correction provides an opportunity for investors with a three to six months time frame to take exposure in the stock with a stop at Rs 250. The upward target over the medium term would be Rs 381 and then Rs 458.

My query is related to addition of open interest during ban period of a stock. In December 2006, IFCI attained 95 per cent of the market wide position limit and so was banned by NSE. Usually when open interest comes down to 80 per cent, only then trading is allowed in that stock. But during December 2006, I observed that December open interest (OI) was coming down but January OI was going up. Why was NSE allowing addition of OI in the January series? We tried taking position in the January series but the trading site did not permit us. How is it possible? Can you please explain this? Sheshadri Achari

A security enters a ban period when its OI reaches 95 per cent of the Market Wide Position Limit. No further addition to OI is permissible and trading in the contract is allowed only to reduce existing positions. It is not possible to add position in the series of the month following the current month, as it would also be construed as taking a fresh position and adding to the existing OI.

The only explanation for the phenomena that you have observed would be that some members could have inadvertently allowed their clients to take position in a security in a ban period. It is the onus of the trading member to see that the prohibition of trading in these securities is followed. Members who violate the ban would have to pay a penalty of 1 per cent of the value of the increased positions subject to a minimum of Rs 5,000 and a maximum of Rs 1,00,000.

I have bought 100 Shares of Novartis India Ltd at Rs 350. I am a long-term investor, kindly advise me about the future prospects of this stock. Should I hold or exit at this level. Manoj Kumar Garg

Novartis (Rs 367.1): In our last review of this stock in August 13, 2006, we had advised accumulating this stock in the band between Rs 380 and Rs 450 with a stop at Rs 350. The price is currently hovering around this long-term support. A fall below this support can see the price heading lower to Rs 260 and then Rs 200. Hold the stock with a slightly lower stop at Rs 320, since you are a long-term investor.

There is a possibility of a long term low forming at current levels. But the stock would have to rally above the resistance that exist at Rs 491 before the long term outlook for this stock turns positive again.

I have bought 100 shares of Hero Honda at Rs 745 and 150 shares of Birla Corporation at Rs 340. I would like to hold these stocks for the long term. What are the prospects of these companies? S. Sankaran

Hero Honda (Rs 743.1): Hero Honda is one of the under-performers in the post-June 2006 rally. It has not been able to recoup even 50 per cent of the loss that it suffered in May and June 2006. The movement after June 2006 can be interpreted in two ways,

It can be the second leg of the correction that started in May 2006. The third move down will drag the price lower to Rs 618 and then Rs 499. Inability on part of the stock to rally beyond Rs 833 over the next three months will bring this count in to play.

The second interpretation is that the move after June 2006 is a consolidation before the price reverses for the long term. A move past Rs 850 is required to lend credence to this count. The stock can then rally to Rs 935 and then Rs 1,065. Hold the stock with a stop at Rs 700.

Birla Corporation (Rs 335.6): The outlook for Birla Corp is positive for both the medium as well as the long term. The stock is consolidating in a range between Rs 300 and Rs 370 since October 2006. The stock can move higher from these levels to Rs 416 and then to Rs 495 over the long term. Hold the stock with a stop at Rs 280.

Could you explain the future outlook for JK Paper and Bell Ceramics. C. K. Ravikumar

JK Paper (Rs 44.1): This stock has not done much since 2000 and is bound by the zone between Rs 40 and Rs 85. The price is currently near the lower boundary of this long-term range. Any upward move will face stiff resistance at Rs 54. A move between Rs 54 and Rs 40 is most likely over the next one year. A break past Rs 54 is required to take the price to Rs 64. Fall below Rs 39 will take the stock to Rs 27.

Bell Ceramics (Rs 15.7): The long-term outlook for Bell Ceramics is negative as it is below its long-term supports. We need to see a rally past Rs 20 before the long-term outlook can turn positive. Fresh purchases should be made only on a close above Rs 20. Hold with a stop at Rs 15.

I am holding Ramratna Wires. Please advise on the prospects for this company. S. V. Sundara Rao

Ram Ratan Wires (Rs 26.8): The long term up trend is intact in this stock. The formation since the low formed in June 2006 inspires confidence.

The stock is currently struggling with the resistance that exists at Rs 29. The stock has the potential to rally past this level to a high of Rs 36 over the next one year.

Hold the stock with a stop at Rs 20.

Please give the technical outlook for Jhagadia Copper bought at Rs 28 and Trigyn Technologies purchased at Rs 29. Mohit Arya

Jhagadia Copper (Rs 13.2): This stock has bounced off Rs 10 twice in recent past, in March and December 2006. So hold on to the stock till it stays above Rs 10. This stock would find it extremely difficult to rally past Rs 18 over the next one year.

Trigyn Technologies (Rs 26.1): This stock has seen a sharp spike upward in December 2006 along with the rest of the bottom rung technology stocks. The stock made a high of Rs 29.8 in September 2005, which should be considered as our immediate resistance.

Since the rise in December 2006 seems like a speculative run-up, the stock can return to Rs 15 levels in no time.

Exit at current levels. Re-enter if the price closes above Rs 35.

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.

More Stories on : Technical Analysis | Stock Markets

Article E-Mail :: Comment :: Syndication :: Printer Friendly Page