The Hindu Business Line : Technical Analysis Q&A

Dr Reddy’s Laboratories (Rs 717.9): In our previous review of this stock early this year, we had mentioned that it was charting a long-term consolidation since May 2006 that is resulting in the stock oscillating in a band between Rs 600 and Rs 900. A three-wave move from the May 2006 peak appears to have been completed at the recent trough at Rs 580. The stock is expected to move past Rs 1,000 in the long-term. Long-term investors can hold on to the stock with a stop at 520. We adhere to the view that the stock is not likely to breach this support over the next one year.

Dr Reddy’s Laboratories is currently charting a short-term up trend. This move will face resistance at Rs 695 and then at Rs 765. Investors with a shorter time frame can book profits at either of these levels.

Dolphin Medical (Rs 8.4): You appear to have purchased this share during the sharp run-up in 2006. The stock has since then slid to sub-Rs 10 levels. The outlook for the stock is rather bleak and it can struggle to get above the resistance at Rs 11 over the next one year. We recommend a switch from this stock.

I want to enquire about Centurion Bank of Punjab. What are the long-term prospects for this stock? Sukhvinder Singh

Centurion Bank of Punjab (Rs 55.7): Centurion Bank of Punjab has been in a long-term up trend since November 2005. After consolidating in an upward moving channel since the beginning of 2007, the stock broke out on December 6 to record the recent peak at Rs 62.9. The stock might ease off in the near term towards Rs 52. But the long-term outlook will stay positive as long as it remains above Rs 47. Corrections that make the stock fall to this level should be perceived as a buying opportunity. The stock can move higher to Rs 84 over the next one year.

I hold Deccan Chronicle bought at Rs 187. What are the prospects for this stock? Thomas Pullan

Deccan Chronicle (Rs 223.8): Deccan Chronicle tested the resistance at Rs 245 thrice between June and September this year before launching in to a correction. This correction has made the stock give up almost 50 per cent of the gains made since June 2006. Recent moves made by the stock indicate that it is not ready to move past this resistance yet and a sideways move between Rs 170 and Rs 250 is likely over the next three months. Investors with short-term perspective can exit the stock near the upper boundary of this trading band. Long-term investors should hold the stock with a stop at Rs 150.

Kindly advise me on Vivimed Labs bought at Rs 164. P. Muniappan

Vivimed Labs (Rs 149.4): This stock is trying to move up from its long-term support zone between Rs 100 and Rs 110. You can hold the stock with a stop just below this area at Rs 98. Vivimed Labs will face resistance from Rs 175 or Rs 195 over the next six months. Short-term investors can book profit at either of these levels. The stock would need to move past Rs 240 to signal the onset of a long-term up-move.

I have shares of Neyveli Lignite Corporation and Karur Vysya Bank. Please advise whether I can hold on to these shares or exit them. Richa Agarwal

Neyveli Lignite Corporation (Rs 248.8): The chart of Neyveli Lignite Corporation appeared dull and boring when we reviewed it in August. We had then held the view that the stock could struggle to move above the long-term resistance at Rs 85. But there has been a sea change in the stock since our last review. The stock broke out past Rs 85 in September and exploded upward in a vertical move that has resulted in a gain of over 300 per cent in the three months between September and November.

This rally is not showing any sign of flagging. The narrow sideways move observed since December 5 appears to be temporary halt before the rally resumes. Short-term investors can hold the stock with a stop at Rs 228. The stock can rally to Rs 300 in the near-term.

Though the long-term target can be determined only after the next correction, investors with a longer horizon should hold the stock with a stop at Rs 160.

Karur Vysya Bank (Rs 420.2): In our previous review of this stock we had given the upper target for Karur Vysya Bank at Rs 312 for the next one-year. The stock has surpassed this target and continues to move from strength to strength. Investors with a medium-term perspective can hold the stock with a stop at Rs 300. The stock can also be accumulated if it corrects to this level with a stop at Rs 280. The medium-term target for the stock is Rs 507.

The long-term trend line at Rs 260 will support the stock in a deeper correction. Long-term investors can hold the stock as long as it remains above this line.

Kindly let me know the future prospects of Rama News Print bought at Rs 30 and Suryachakra Power bought Rs 38. Bhaskar Joshi

Rama Newsprint (Rs 40.1): Rama Newsprint recorded a frenzied climb in September 2006 during which, the stock went up from one circuit filter to another. Volumes too reached a crescendo as the stock raced from Rs 8 to Rs 58. But it has been in a long drawn corrective phase since October 2006. The stock has made a double bottom at the long-term support around Rs 25.

However, the volume action suggests that many investors were lured in to buying the stock while it was spiralling upward in September 2006. These investors would be eager to divest their holdings as the stock moves higher. So, we expect the up side to be capped in the band between Rs 45 and Rs 48 in this stock. Investors are advised to book profits in this zone.

Suryachakra Power (Rs 43.3): This stock does not have enough history to allow us to form an opinion regarding its long-term prospects. The immediate supports for the stock exist at Rs 38 and then Rs 30. Hold the stock with a stop at Rs 35 if you are a short-term investor. If this support holds, the stock can move higher to Rs 60.

What is the entry level for Today’s Writing? Anita Pednekar

Today’s Writing (Rs 90.5): The entry level for this stock will vary according to your investment horizon. Today’s Writing faces long-term resistance around Rs 100. The stock would have to close past this level before we can assume that it has broken past the trading band between Rs 30 and Rs 100.

Short-term investors can wait for a weekly close above Rs 100 before buying shares of this company.

Conversely, you can buy the stock when it corrects to the support band between Rs 65 and Rs 70.

I have shares of Info Edge purchased at Rs 1450. Please let me know the future prospects of the company. Rajesh Tiwari

Info Edge India (Rs 1,408.0): Info Edge is in a strong intermediate up trend since September 10. This trend will be threatened only if the stock falls below Rs 1,350. Investors with a short-to-medium term perspective can hold the stock with a stop at Rs 1,340. A reversal from here can make the stock rally to Rs 1,900 over the next three months.

— 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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