The Hindu Business Line : Tech Tools

I bought Rolta at Rs 87, when I spotted a long term Symmetrical Triangle breakout. It now has broken out of a long term (11 months) upward rising channel at Rs 425, giving a massive target.

I also have Prakash Industries that was bought at Rs 45 after a break out from an 11-month sideways movement in a rectangular channel indicating a massive target. Please give your view on these two charts. Viral

Rolta (Rs 464.4): The first instance when you purchased Rolta India at Rs 87 is a smart identification of a breakout above a long-term trend line that connected the peaks formed in October 2002 and January 2004.

Symmetrical triangles are continuation patterns and help in identifying the prolonging of the prevalent trend. That pattern is not appropriate at this juncture. However, you seem to have used the right mix of instinct along with technical analysis to initiate that buy.

The breakout above the 11-month trend channel is again well spotted. It implies that the gradient of the stock's movement will change.

But no further inference or targets can be derived with the aid of the trend channel. Targets can, however, be derived by using other technical tools such as Elliott Wave counts, support and resistances etc.

The intermediate-term outlook stays strong till Rolta sustains above Rs 420. Immediate target for the stock is Rs 525. In the long-term, the stock could move to Rs 640, if the support at Rs 420 remains unchallenged. Hold with a stop at Rs 420.

Prakash Industries (Rs 55.6): The sideways moving channel that you have identified in Prakash Industries too is relevant. The breakout and consolidation above Rs 45 was a signal that the stock was mustering strength prior to the next move upward.

The targets for this move are Rs 51 and then Rs 63.

The intra day high of Rs 65 made on June 2, 2006, can also act as an impediment in the medium term. Hold with a stop at Rs 44.

What is the short-term target of Bata India brought at Rs 170? I am holding 90 shares. Can we expect a deep correction in the month of May similar to the one seen in the previous years? S. Nedumaran

The month of May has acquired this ominous image after the sharp cracks witnessed in May 2004 and in May 2006. Though the stock markets do witness a lull in activity in this month because many among the market participants prefer to go on a vacation in this period, it would be wrong to suppose that there would a sharp correction this year just because there was one last year. This is one of the many superstitions prevalent in the stock markets and need not be taken seriously.

Bata India (Rs 173.9): The short-term target of Bata India would be Rs 195. The stop loss should be placed at Rs 145.

Lokeshwarri S. K.

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