The Hindu Business Line : Query Corner

ICSA (Rs 1,124.6): The long-term up trend is intact in this stock. Though the stock lost more than 50 per cent in the May 2006 correction, the recovery thereafter has made it gain over 200 per cent from the June 2006 low. The movement since February 2007 mimics a long-term consolidation phase. A sideways move in a band between Rs 900 and Rs 1,200 is conducive for the long-term outlook for this stock. This phase can be a precursor to another long-term breakout that takes the stock price to Rs 1,500 over the next one year. Investors can hold the stock till it remains above Rs 900.

What is the future of Celebrity Fashions? Is it worth investing now? S. K. Choudhury

Celebrity Fashions (Rs 68.1): Celebrity Fashions has been persistently moving lower since its listing in January 2006. The stock has been unable to make headway due to profit booking pulling the stock lower at every rally. This strong down trend deters us from suggesting a buy at these levels. Short-term investors can initiate fresh purchases once the stock moves above Rs 85 with a short-term target of Rs 105. Investors with a longer time horizon should invest only if the stock closes above Rs 110. The stock could then move on to Rs 135 and then Rs 180 over the long-term.

Please let me know if I can invest in Chemplast Sanmar and Karnataka Bank at current levels. Srikanth

Chemplast Sanmar (Rs 7): The stock is in a down trend since February 2007. The pattern formed from March 2007 resembles a descending triangle formation. This is a bearish formation and indicates that the stock can move lower over the medium term to Rs 5.9 or Rs 4.6. Do not invest in the stock at current levels. Wait for a close above Rs 7.5 to invest with a short-term target of Rs 8.5 and then Rs 8.9. The high degree of volatility witnessed in this stock since 2005 makes it unsuitable for long-term investors.

Karnataka Bank (Rs 173.8): Karnataka Bank has been undergoing a gentle correction since February 2007. Since this correction follows the sharp ascent from July 2006, it can be considered a pause before the long-term up trend in the stock resumes. You can invest in the stock at current level with a stop at Rs 158. The targets for the next three months would be Rs 202 and then Rs 221.

I have bought Petronet LNG at Rs 53. Please let me know the technical forecast for this scrip. Rajesh Tiwari

Petronet LNG (Rs 51.2): Petronet LNG reversed from the support at Rs 36 in June 2006. The long-term outlook for this stock will remain rosy till the stock remains above this level. Investors with a two to five-year horizon can buy this stock as it nears this support. The stock can move beyond Rs 100 over the long-term. But the stock is in a long-drawn consolidation phase since November 2005. The broad range between Rs 35 and Rs 65 can continue to confine the stock for the next three months. Hold with a stop at Rs 41.

I have bought HDFC at Rs 1,050. How much longer should I hold on to the stock? Can I enter ICICI Bank at current level of Rs 950? Ramesh Santanam

HDFC (Rs 1,818.7): The upward move that began from 1999 continues to be in force in this stock. The move since February 2007 resembles a flat A-B-C correction of the move since June 2006. HDFC could oscillate in the band between Rs 1,300 and Rs 1,800 for a few months before another upward breakout takes the stock to Rs 2,053 or Rs 2,343. Long-term investors ought to hold the stock with a stop at Rs 1,300.

The stock will face resistance in the band between Rs 1,800 and Rs 1,850 in the short term. Investors with a short-term horizon can book profit in this zone and try to re-enter the stock around Rs 1,400 with a stop at Rs 1,300.

ICICI Bank (Rs 913.1): The pattern in ICICI Bank's chart is similar to that of HDFC. The stock is consolidating at higher levels after leading the stock markets higher in the post-May 2006 bounce. Continuation of the move between Rs 1,000 and Rs 800 would mean that the stock is inclined towards moving higher over the long-term. Investors with a two to five year horizon can buy in the zone between Rs 800 and Rs 850 with a stop at Rs 780.

Fresh purchases should not be initiated on a fall below Rs 800, as it would mean that the stock is heading towards Rs 650.

Kindly advise me about the long-term prospects of Eveready industries, which was purchased at Rs 65. Madhusudhana Rao

Eveready Industries (Rs 52.6): Eveready Industries has been under selling pressure since September 2005. The sequence of lower peaks and troughs indicates that investors are rushing in to sell at every rally. Since the stock has breached the long-term support that exists at Rs 61, it could now fall to Rs 45. We recommend exiting the stock at this point. Consider re-entry once it rallies past Rs 77.

I bought Ceat at Rs 164 since I observed on the chart that the deep correction from Rs 155 to Rs 100 and the subsequent high resembles a cup and handle pattern or inverted head and shoulder formation.

Is this interpretation correct? Suggest target and stop loss for the next six months. S. M. S. Reddy

Ceat (Rs 170.6): Your study has rightly revealed that the daily chart of Ceat has etched a cup and handle formation since February 2007. It cannot be called an inverted head and shoulder since the bottom in this chart was rounded and not `V' shaped. Cups with handles are similar to the rounding bottom formations. But there is generally a brief period of consolidation at the end of the cup formation that has to be down trending.

The higher volumes that accompanied the breakout from the formation also help to conform the pattern. But these patterns may reverse after a limited rally of 10 to 15 per cent. The stock has already moved 16 per cent since the breakout. So the short-term target could have been achieved already. Hold the stock with a stop at Rs 148. If the stock stays above this level, it can move higher to Rs 211 over the next six months.

Can you give me the long-term outlook for LIC Housing Finance and First Source. I intend buying these stocks. Nagendra

LIC Housing Finance (Rs 168.6): LIC Housing Finance made a trough at Rs 117 in May 2004. The long-term outlook will stay positive in this stock as long as this level holds. Investors who wish to hold this stock for a few years can buy at current levels with a stop at Rs 110. The stock can move to its former high of Rs 270 over the long term.

The near-term outlook for LIC Housing Finance is also positive. The movement in the stock since April 2007 indicates strength. Though short-term turbulence can drag the price lower to Rs 160 or Rs 148, the stock is expected to move higher towards Rs 225 over the next one year.

Firstsource Solutions (Rs 84.5): It is not possible to give a long-term outlook for First source Solutions since it was listed in February 2007. The near term supports for the stock are at Rs 81, Rs 78 and then Rs 74. Those desiring to buy the stock can do so if the stock reverses from these supports.

I have purchased DCM Shriram Consolidated at Rs 80. Shall I purchase more shares in the Rs 76 to Rs 78 range? Ankur Govil

DCM Shriram Consolidated (Rs 74.1): This stock is in a long-term bear phase since May 2006. Strong long-term support exists at Rs 75. This level has supported the stock four times since October 2005. However, a fall below this support will take the stock lower to Rs 61.

We do not advise purchasing additional quantity at this juncture since there are no traces of strength visible in the stock in the daily chart. Until then, hold with a stop at Rs 72.

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.

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