The Hindu Business Line : Technical Analysis Q&A

Tulip IT Services (Rs 710.3): This stock is currently correcting the up-move that resulted in a five-fold increase from the low of Rs 162 recorded in June 2006. This correction is halting at Rs 660.

The positive outlook for the medium term will stay as long as the stock stays above Rs 645. A fall below this support can make the stock fall to Rs 550 or Rs 464.

Long-term investors should stay invested in the stock as long as it trades above Rs 464. You can add to your holding if the stock sustains above Rs 640 over the next two months.

In such a set-up, the stock can move to Rs 1,180 over the next one-year.

I am holding shares of Punjab National Bank bought at Rs 395. Please let me know the future prospects of this stock. Should I exit or hold at these level? Manoj Kumar Garg

Punjab National Bank (Rs 500.8): This stock is currently reacting from the previous high of Rs 582. Short-term outlook is dire, as the stock has closed below the 200-day moving average. The stock could move down to Rs 484 or Rs 473 in the near term.

Fall below the second target will make the medium term outlook negative for this stock. The stock could then move lower towards the March low of Rs 400. You can exit the stock at current levels or else hold with a stop at Rs 470.

I have purchased Orchid Chemicals at Rs 339. What should I do with this stock that I am holding for more than a year? J.S.Arora

Orchid Chemicals (Rs 220.8): Orchid Chemicals has not recovered from the sharp cut it received in May 2006 that caused 64 per cent erosion in the stock price. The post-June 2006 recovery could retrace only 50 per cent of the fall.

This factor indicates that the bears continue to hold sway in this counter. The stock is expected to head towards its long-term trend line positioned at Rs 209 over the medium term.

Breach of this support will drag the stock towards its June 2006 low of Rs 175. Hold the stock with a stop at Rs 200 and try to exit as it nears the Rs 280 to Rs 300 resistance zone the next time.

Exit the stock if it falls below Rs 200.

I have bought Uttam Galwa Steel at Rs 50 per share and PBA Infrastructure at Rs 181 per share. Shall I book my losses on these shares? M. Swaminathan, P. C. Singhal

Uttam Galwa Steel (Rs 33.5): Uttam Galwa Steel is in a recovery mode since the trough of Rs 23 made on June 9, 2006. But the recovery has halted at the first resistance at Rs 43. A firm breakout beyond this level is required to take th e stock to the subsequent resistance levels at Rs 49 and then Rs 55.

On the other hand, a reversal from Rs 43 will make the stock fluctuate in the range between Rs 23 and Rs 43 for a few more months. Hold the stock with a stop at Rs 30. Exit the stock if it struggles to rally past the resistance at Rs 43. Fresh purchases should be initiated only on a close beyond this level.

PBA Infrastructure (Rs 85.6): PBA Infrastructure’s attempts at staging a come back from the setback it received in the middle of last year have not been too successful. The stock reversed from the intermediate term resistance at Rs 157 in December 2006.

The stock is moving sideways between Rs 70 and Rs 100 since February. Unless it closes above Rs 110, it is expected to stay confined to this range.

Long-term investors can hold the stock with a stop at Rs 70. Investors with a shorter time horizon can exit at current levels and re-enter on a close above Rs 100 with the expected target of Rs 125 and then Rs 158.

I hold ITC bought at Rs 170 and Ambuja Cement bought at Rs 146. What is the short and medium term prospect of these stocks? Debasish Saha

ITC (Rs 171.8): In our previous review of ITC in December 2006, we had mentioned that the long-term outlook would turn negative on a weekly close below Rs 165.

The stock closed below this level in February 2007 and went on to form a low of Rs 130 in March 2007. This low marked the completion of a three-wave flat pattern from the May 2006 peak.

If we consider the long-term bull market in ITC since 2003, the first support for the stock exists at Rs 147. Sideways move between Rs 140 and Rs 210 for 12 to 24 months could be conducive to this long-term bull market. Long-term investors can hold the stock with a stop at Rs 135.

Short-term targets for the stock are Rs 176 and then Rs 185. The medium term resistance exists at Rs 193. Stop loss level for medium term investors would be at Rs 150.

Ambuja Cement (Rs 125): The last time that we visited this stock in November 2006, we had pointed that the fifth wave of the long-term bull market that commenced in 2003 was in motion and could take the stock to Rs 152 or Rs 203. Ambuj a Cement reversed from Rs 150 in January and plunged to Rs 100 by March 2007.

Since a five-wave move is now complete from the 2003 lows, a long-term down trend has commenced in this stock. The three-wave recovery between April and July is the B wave of this long-term down trend. The C wave down can now pull the stock lower to Rs 109 or Rs 90. However, the Fibonacci retracement level support at Rs 100 could arrest a deeper correction in this stock.

Near term support for the stock exists at Rs 120. Short-term investors should hold the stock with a stop at Rs 118. Short-term rallies can take the stock higher to Rs 135 and then Rs 141. Exit the stock if it struggles to get past the resistance zone between Rs 135 and Rs 140.

I have purchased 150 shares of KRBL at Rs 190 per share. Please let me know the future prospect for this share. Shantappa N. Mundas

KRBL (Rs 86.5): This stock has long-term support in the band between Rs 80 and Rs 95. KRBL has reversed from this zone twice since June 2006. Another reversal from this band can take the stock higher to Rs 130 over the medium term. The ability of the stock to rise past this resistance would determine if the stock could shake of the downward pressure and move higher to Rs 142 or Rs 155. Exit the stock if it is unable to rally past Rs 150 over the next one year. Hold till then with a stop at Rs 78.

What are the prospects of South Indian Bank? I have invested 250 shares at Rs 140? Ajay J. Govind

South Indian Bank (Rs 149.5): The stock has been moving up very sharply since June, recording a gain of over 60 per cent in this period. It has also broken out of the long-term trend channel. Though there can be a correction that drags the stock lower to Rs 138 or Rs 124 in the immediate term, investors should hold on to this stock as long as the second support holds. Investors with a shorter time horizon can book some profits at these levels. — Lokeshwarri S.K.

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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