The Hindu Business Line : Query Corner

I have purchased IDBI at Rs 114 per share and shares of HPCL at Rs 275 per share. Will you please explain the short-term and medium-term prospects of these stocks? Ramesh. R

IDBI (Rs 108.15): IDBI has been struggling to surpass the peak at Rs 120 since January 2005. The stock is once more reversing from this long-term resistance level. The weakness can extend over the medium term. The immediate support for the stock is at Rs 104. Fall below this support will take the stock to the next support band between Rs 82 and Rs 90.

Investors holding this stock for the short-term can book profits at this juncture. Otherwise, they can hold with a stop at Rs 102. Medium-term investors should hold with a deeper stop at Rs 80. The stock is expected to move in a broad range between Rs 60 and Rs 130 for the long term.

Hindustan Petroleum Corporation (Rs 248.10): HPCL is in a long-term bear market since April 2004. Though a zigzag was completed in July 2006, the movement since this trough does not inspire any confidence. The stock has been moving in a sideways range between Rs 200 and Rs 320 since this low.

Strong resistance for the medium-term would be at Rs 325. The outlook for this stock will stay negative until the stock trades below this level. Breakout past this level will make the stock rise to Rs 375 and then Rs 415. Hold the stock with a stop at Rs 235. The next support would be at Rs 205.

I have purchased shares of Electrotherm for Rs 400. Should I hold on? I would also like to know the prospect of Amararaja Batteries bought at Rs 375. C. D. Mahesh

Electrotherm (Rs 521.15): Electrotherm has been moving sideways between Rs 420 and Rs 600 since February. It is having trouble rising over the ceiling at Rs 590, having turned lower from this level thrice since February. But the higher troughs formed in the last three months have formed an ascending triangle, that is a positive signal. Short-term investors can hold the stock with a stop at Rs 470.

The stock can spend a few more months oscillating in the current range between Rs 400 and Rs 600. Breakout beyond Rs 600 will take the stock towards Rs 800 in the long-term.

Amararaja Batteries (Rs 585): There is no let-up in the relentless rally witnessed in this stock. Amararaja Batteries has recorded a four-fold increase since last June. There can be weakness in the stock in the short-term that can drag it lower to Rs 535 or Rs 490. If the stock sustains above Rs 535, it can move higher to Rs 726 over the next three months. Investors with a shorter horizon can hold the stock with a stop at Rs 525.

Long-term investors can keep a deeper stop at Rs 482. Move below this level will drag the stock to Rs 412.

I hold Willard India bought at Rs 40 and AIA Engineering at Rs 1,710. Please let me know the prospects of these stocks. P. S. Sakeer Hussain

Willard India (Rs 5.62): This stock has been battered out of shape in the ten years between 1994 and 2004 when it was pushed to sub-Rs 10 levels. Though the stock made an attempt to rally to Rs 19 in September 2005, the recovery could not sustain. The outlook along all the time frames is negative for this stock. You can exit the stock at current levels and consider re-entry if it manages to rally above Rs 24.

AIA Engineering (Rs 1,408.35): AIA Engineering had a spectacular run from the June 2006 low of Rs 391 to Rs 1,818 in June 2007. The stock is currently correcting the entire move witnessed in the last one year. It has strong support in the band between Rs 1,280 and Rs 1,400. It is expected to bounce from this support zone and spend a few months consolidating in the band between Rs 1,250 and Rs 1,850. Such a move would be positive for the long-term.

However, a move below Rs 1,280 can make the stock move lower to Rs 1,100 or Rs 950. Hold with a stop at Rs 1,250. Fresh purchases can also be made with the same stop.

I hold shares of Manugraph Industries purchased at Rs 200. Should I exit now or average down? Krishna Kumar R

Manugraph Industries (Rs 128.15): The stock is halting above the long-term support at Rs 120. You can hold the stock with a stop just below the current levels at Rs 120. A fall from these levels will take the stock below Rs 100 to Rs 5 6. Buying additional quantity is not recommended here, as there is no sign of reversal in the stock yet. A short-term bounce back can make the stock move higher to Rs 155 or Rs 182. A firm close above Rs 200 is required to signal the reversal of the medium-term down trend.

I have Fag Bearings at Rs 690 and Shipping Corporation at Rs 230. Please give a technical view of the two. James J

Fag Bearings (Rs 655): The sharp fall of over 50 per cent recorded in May 2006 in Fag Bearings qualifies as a long-term correction. But the stock has been able to shake off this bearishness and has made good progress since then. The fr esh leg of the long-term trend that began from the June low of Rs 374 can take the stock beyond its all-time high to Rs 1,055. A fall below Rs 500 would negate this outlook. Hold the stock with a stop at Rs 480. Sideways move between Rs 550 and Rs 700 would provide an apt juncture to initiate fresh buys.

Shipping Corporation (Rs 194.20): The stock is currently reversing after forming a double top around Rs 230. The immediate support for Shipping Corporation lies at Rs 182. Exit the stock if this level is breached since it can then hurt le towards Rs 150. The positive outlook for the long-term would not be affected until the stock trades above Rs 145.

Recently, I bought KEC International at Rs 532 and Era Construction at Rs 357. What price targets can be expected for the short term in these stocks? Abhayakumar Shah

KEC International (Rs 610.65): KEC International has been in an intermediate-term up trend since August 2006 that made it rise from Rs 210 to Rs 599. The stock has been moving in an upward moving trend channel since then. The lower bou ndary of this channel is positioned at Rs 536. If the stock holds this support, it can move higher to Rs 693 or Rs 750 over the long-term. Investors with a short-term time horizon can hold the stock with a stop at Rs 532. Investors with a longer time horizon can hold the stock with a stop at Rs 440.

Era Construction (Rs 522.85): This stock has been extremely volatile since May 2006, oscillating in a 300-point band between Rs 200 and Rs 500. Though the higher bottoms recorded since July 2006 is a positive sign, the inability to ral ly above the ceiling at Rs 550 is a point of concern. The stock is once again reversing from this resistance level since July 2007. Era Constructions can weaken to Rs 480 or Rs 424 in the near term. Book some profit at these levels and look out for buying opportunity as the stock falls to the support band between Rs 400 and Rs 420. — Lokeshwarri S.K.

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