The Hindu Business Line : Query Corner

Jaiprakash Associates (Rs 246.9): Jaiprakash Associates has recorded a very sharp fall from the January peak at Rs 510 that has resulted in eroding 50 per cent of its value. Although the fall would have rattled investors, the long-term trend in the stock continues to be up. The long-term trend line for the stock is currently positioned at Rs 200.

The outlook for the longer-term would get damaged only if this level is penetrated conclusively.

The stock is currently halting above its 200-day moving average line that is present at Rs 250. JP Associates has also corrected 50 per cent of the gains made since 2003. In other words, the stock could reverse from current levels. If it falls further, the fall could halt around Rs 200.

The resistance levels for the stock are present at Rs 345 and then Rs 385. Investors with a near-term horizon can divest their holding if the stock fails to move beyond the second resistance over the next three months.

I have purchased RNRL at Rs 225. Should I hold these shares or sell them? P. Nyamathulla Khan

Reliance Natural Resources (Rs 132.5): RNRL recorded five-fold gains between August 2007 and January 2008. But the fall since then has been nightmarish for most investors in the stock. The stock shed over 50 per cent in just three sessions giving investors no route for exit. The long-term trend in the stock has not reversed yet. It will do so only if the support at Rs 100 is breached conclusively. Investors can hold the stock until then.

That said, the medium-term movement in the stock is not very convincing. It is moving sideways between Rs 110 and Rs 170 since the last week of January.

Chart patterns formed in this range suggest that the downward move in the stock could continue and the stock can test the Rs 75 level again. Hold the stock with a stop at Rs 100. You can exit the stock if it rallies towards Rs 160 or Rs 190.

At what level can I invest in Larsen & Toubro and Siemens for a long-term? M. Sekhar

Larsen and Toubro (Rs 3,434): L&T too is currently in a longer-term correction and the stock is correcting the entire gains made since 2003. But the relatively shallow degree of correction emphasises the strong prospects for the stock over the next two years or more.

The immediate-support from a long-term perspective is at Rs 2,900. We expect the stock to hold above this level in the current correction. A broad-based movement between Rs 2,900 and Rs 4,700 can follow for a few months before it moves beyond this range.

Investors can watch out for buying opportunity every time the stock dips below Rs 3,000.

The support below lies at Rs 2,400. But buyers are likely to flock to this counter if it were to plumb these depths. This could result in a sharp recovery that would be hard to buy into. The long-term trend deciding level for L&T is Rs 2,400.

Siemens (Rs 1,566.6): The stock of Siemens underwent an exuberant spurt of almost Rs 1,000 in the three months from September 2007. This burst was arrested at Rs 2,250 in November 2007 and the stock is currently in an intermediate correction. Though the stock tested the 200-day moving average briefly in the second week of February, the long-term view for the stock stays positive.

If we consider the long-term bull market that began in 2003, the stock has retraced about one-third of this move. This shallow retracement implies that the stock could move forward over a long-term time frame.

The zone where investors can accumulate the stock is between Rs 1,350 and Rs 1,450. Though Siemens could struggle to move beyond the resistance zone between Rs 1,800 and Rs 1,850 over the medium-term, investors can hold on to the shares with a stop at Rs 1,100.

I want to know the technical outlook of Noida Toll Bridge purchased at Rs 73. Jagjit

Noida Toll Bridge (Rs 44.6): Noida Toll Bridge moved out of the shadows in September 2007 and recorded a strong rally to peak at Rs 85 in January 2008; a certain pattern is discernable when we view the history of this stock.

It recorded a similar spectacular move between March and May 2006 and formed a long-term peak at Rs 64 in May 2006. The fall that followed pulled the stock down to Rs 22.

In other words, Noida Toll Bridge can be classified among the stocks that move in the last leg of the bull phase.

Charles Dow had pointed out that one way of recognizing the final stages of the bull market is when the ‘cats and dogs’ begin moving up. Cats and dogs in trading parlance mean stocks that are speculative with low intrinsic worth.

The immediate support for the stock exists around Rs 48. A reversal from these levels can take the stock to Rs 60 where you can consider exiting the stock. It is hard to envisage a breakout beyond this level over the next one year.

In your September 30, 2007 edition, you had mentioned, “The long-term outlook for TCS would get marred only if it falls below Rs 840. Since we do not expect the stock to fall below Rs 840 over the long-term, long-term investors can hold the stock with a stop at Rs 820.” I would like to know your views on this scrip as the price has recently moved below Rs 840. Harish Somayaji

TCS (Rs 897.4): This stock did plummet to a low of Rs 730 on January 22. But it closed at Rs 867 in the next trading session. So, we will not consider the minor blip as a long-term reversal in the stock.

The stock is currently trying to steady itself in the band between Rs 800 and Rs 1,000.

The area around Rs 800 is a key long-term support since it occurs at 61.8 per cent retracement of the move recorded between June 2006 and January 2007.

However, in view of the prevalent weakness in the stock markets in general, we will move the stop-loss for long-term investors lower to Rs 700.

The stock has bounced off Rs 727 in June 2006 and again on January 22. Fall to Rs 700 levels would be buying opportunity for longer-term investors.

What is the long and medium-term outlook for Areva T & D bought around Rs 3000 last Diwali? Sandeep Siddappa

Areva T&D (Rs 1,747.1): Areva T&D almost doubled in price in the two months spanning October and November 2007.

However, the entire gains recorded in this period have been ceded in the correction that ensued since the beginning of this year.

Despite this correction, the long-term trend in the stock continues to be up. This positive outlook will be negated only on a fall below Rs 1,260. Long-term investors can therefore hold on to the stock as long as this level holds.

The medium-term trend in the stock is however down. The stock is expected to remain in a sideways range between Rs 1,500 and Rs 2,200 for a few months before continuing its upward trajectory. The medium-term resistance for the stock would be at Rs 2,200 and then Rs 2,600.

— Lokeshwarri S.K.

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