The Hindu Business Line : Query Corner

I hold shares of Unichem Laboratories bought at Rs 145 and Moser Baer purchased at Rs 254. Kindly advise the future prospects of both these companies. R.K. Shyam Sundar

Unichem Laboratories (Rs 140.2): The long-term trend in Unichem Laboratories is down since February 2006. The stock has shed over 50 per cent of its value since this life high at Rs 314. The sharp fall recorded in January 2008 has taken the stock to its long-term support zone between Rs 140 and Rs 160. Although the attempts at recovering have been very half-hearted so far, the stock has the potential to bounce from current levels and move higher towards Rs 220 or Rs 260 again. But we expect the stock to face strong resistance around Rs 250 over the next one year. Investors with a medium-term perspective can book profits around this zone.

On the other hand, a fall below Rs 140 will mean that the stock is heading towards the next support zone around Rs 100. Stop loss ought to be at Rs 130 for long-term as well as short-term investors.

Moser Baer (Rs 152.1): Moser Baer formed a triple-mountain top pattern in the period spanning July 2007 and January 2008 portending an imminent fall indicated by the inability of the stock to move past the ceiling at Rs 340. The stock has fallen from Rs 340 to Rs 150 in the first two months of 2008. Despite the intermediate-term outlook being weak, the long-term trend line has not been penetrated yet in this stock. The stock is, however, poised just above this line and the recovery has been feeble this far.

You can hold the stock as long as it remains above Rs 140. The next long-term support is present at Rs 110. The resistance levels for the next one year would be at Rs 230 and then Rs 270.

I would like to know your outlook on GMDC purchased at Rs 335 and STC purchased at Rs 626. N.C. Neelam

Gujarat Mineral Development Corporation (Rs 355.2): The bull-market that began in GMDC at the trough of Rs 48 in June 2006 terminated in November 2007 and the stock has been in an intermediate term correction since then. This correction has resulted in the stock retracing 50 per cent of the move recorded from the 2006 low. However, the long-term outlook for this stock stays positive. This outlook will be threatened only on a slump below Rs 270. Investors with a long-term horizon can hold the stock as long as this level holds.

However, patterns on the daily chart suggest that the stock could stay volatile in the near term. The short-term range for the stock could be between Rs 350 and Rs 450. Short-term investors can exit the stock close to the upper boundary.

State Trading Corporation (Rs 874.7): STC too began its long-term up-move in the middle of 2006 and the stock yielded spectacular gains to investors in its race towards Rs 1,700, achieved in November 2007.

However, the stock is correcting over the last four months and this long-term up-move is currently in the danger of reversing. This would happen once the stock moves decisively below Rs 700.

The stock is currently trying to reverse from this level. Any short-term up move can take the stock higher to Rs 950 or Rs 1,100. It would be prudent to move out of the stock in such rallies since the low volumes on this counter would make exit difficult as it moves down from one circuit to another. The near-term movement suggests that the stock could test the 600 levels in the medium term.

What is the long- and medium-term outlook for Jai Corp. Should I hold the stock or sell it? Alpesh Furiya

Jai Corporation (Rs 717.2): Investors in Jai Corporation have nothing to complain about since this stock has yielded multi-fold returns since 2006. However, the current correction phase would be painful for those who bought the stock in the last quarter of 2007, since the stock meandered sideways between Rs 1,000 and Rs 1,500 in this period before plunging lower in January. The long-term up trend that began in 2006 continues to be in force. The long-term view would be impacted only if the stock fell below Rs 500.

But the near-term trend in the stock is weak. The sideways move between January 24 and March 4 appears to be a temporary halt before the next downward move unfurls. The next leg down can drag the stock price to Rs 670 or Rs 500.

Investors with a shorter horizon can hold the stock with a stop at Rs 650. Long-term investors can hold with a stop at Rs 480. Exit the stock if the long-term stop loss is breached since the next downward target would be Rs 270.

Kindly advise me whether I should hold or to sell UCO Bank purchased at Rs 70. Tony, Babu Mallela, Jagjit Singh

UCO Bank (Rs 39.6): The relentless slide in the stock price of UCO Bank since the beginning of this year has shaved more than 50 per cent of the stock’s price from its peak. Though the stock is correcting the entire up-move recorded since 2006, it is not time to lose heart yet. UCO Bank is halting just above the key long-term support at Rs 42. The stock could reverse higher from these levels. In case the weakness in the broader market pulls the stock price lower, it can seek support at Rs 35.

This would be the support that long-term investors ought to watch out for. Resistances over the next one year would be at Rs 60 and then at Rs 70.

I am holding 100 shares of Videocon Industries and 100 shares of Shree Renuka Sugars. Please give your outlook on these shares. Vikram Doshi, Varsha Doshi

Videocon Industries (Rs 351.8): Videocon Industries has been moving in a band between Rs 350 and Rs 500 since 2005. However, the stock broke out of this band in December 2007 and went on to record a peak at Rs 871. This spurt in the stock price has proved to be entirely speculative in nature since all the gains made in December 2007 was retraced in the first two months of 2008.

The stock is currently back to its long-term band between Rs 350 and Rs 500. The support at Rs 350 has buttressed the stock thrice in the period between 2005 and 2007. Long-term investors can therefore hold the stock with a stop at Rs 340. A reversal from here can take the stock price towards Rs 500 again where you can sell the stock.

Shree Renuka Sugar (Rs 896.9): Shree Renuka Sugars has made a strong recovery since March 2007, rising from a low of Rs 260 to Rs 1360. The stock has managed to hold on to these gains despite the recent market meltdown.

The long-term up-trend continues to be in place. This up trend will be threatened only if the stock dips below Rs 675.

The near-term outlook for the stock is, however, weak. It can move lower to Rs 812 or Rs 751. The stock is likely to move sideways between Rs 750 and Rs 1,350 over the medium term.

I have purchased Lokesh Machines at Rs 149. Should I sell it? Manjula