The Hindu Business Line : Query Corner

Varun Shipping bounced off the lower boundary in March 2007 and commenced an intermediate term up-trend. This up-trend is still in force despite the sharp correction witnessed since this January.

The key intermediate-term support for the stock is around Rs 75. The presence of the long-term averages at this level adds to its significance. Investors with a long-term horizon can hold the stock as long as it sustains above Rs 60.

For the short-term however, the stock faces resistance at Rs 80.

A reversal from here can make it fluctuate in the band between Rs 60 and 80 for a few more months.

Short-term investors can book partial profits at the current juncture. Subsequent resistances are at Rs 86 and then 92.

Please give your view on UB Engineering. Vikram Doshi

UB Engineering (Rs 92.3): UB Engineering is one of the stocks that moved out from the wilderness in the second half of 2007 to record a breath-taking rally that made it rise from Rs 40 to Rs 215 in six months.

But the speculative force behind this run-up is amply demonstrated by the decline from the January peak that eroded almost all these gains in less than three months.

The recovery since March faces the first hurdle in the band between Rs 100 and 110 and then at Rs 125.

The stock is struggling to surpass the first hurdle currently. Short-term investors can divest their holdings at either of these levels. Stop loss is recommended at Rs 64.

I am holding shares of Dish TV purchased at Rs 72 and Tata Elxsi at Rs 275. Kindly advise whether I should continue to hold them or book loss and shift to some other scrip. Pramod

Dish TV (Rs 52.7): This stock is in a down-trend since June 2007.

The recovery in November 2007 fizzled out around the key resistance at Rs 100 and it created a new all-time low at Rs 41 this March.

The recovery from this trough is reversing from Rs 66, which is the first target for any short-term up-move.

Inability to surpass this level is a negative from the near-term perspective and signals the possibility of another decline towards Rs 40.

Investors can hold the stock with a stop below the March low at Rs 40. A move beyond Rs 85 is needed to make the medium-term view positive for this stock.

Else, a sideways move between Rs 40 and 80 can ensue for the rest of this year.

Tata Elxsi (Rs 180.9): The structural bull market that commenced in the last quarter of 2001 ended in June 2007 and the stock is in a long-term correction since then.

Though the stock has lost over 60 per cent of its value since this peak, investors can take heart from the fact that the stock is halting at the key long-term support at Rs 150.

Long-term investors can hold the stock as long as this level holds.

It would also be a good idea to accumulate the stock in the band between Rs 100 and 150 since it is expected to move to a new high over the long-term.

The recovery from the March trough appears strong enough to take the stock to Rs 225 or Rs 250 over the next three months.

Short-term investors can book some profits at these levels. The stop loss level for these investors would be Rs 175.

I have purchased shares of Hindalco at Rs 168. Please let me have your outlook on this. A T R Soura

Hindalco (Rs 173.5): Hindalco is moving in an upward moving trend channel since May 2004, making it an ideal trading stock.

Barring the outburst in April 2006, the stock’s movement has been confined within this band.

The lower boundary of this channel is currently positioned at Rs 150 while the upper boundary is at Rs 220.

In other words, investors can hold the stock with a stop at Rs 150 and book profit every time it moves above Rs 200.

Those looking for an entry point can buy the stock in the zone between Rs 150 and 170.

The near-term trend for the stock is however negative and it can slide lower towards Rs 170 in the near future. Near-term resistances are at Rs 210 and then Rs 221.

Please give your advice on Ansal Properties purchased at Rs 341. Ramanujam

Ansal Properties and Infrastructure (Rs 163): In our review of Ansal Properties in July 2007, we had written that long-term investors can hold the stock as long as it holds above Rs 150.

The target over the following year was given at Rs 430. The stock reversed from Rs 435 in January 2008 and moved below Rs 150 to form a trough at Rs 134 in March. The formation of a lower trough is a negative from a long-term perspective.

Patterns in the daily chart do not induce confidence regarding the near-term prospects of the stock either.

It could stay volatile in the range between Rs 130 and 230 over the next three months.

A move beyond Rs 250 in required to make the short-term outlook positive.

You can exit the stock at current levels and buy it back once it closes above Rs 250.

Please advice on the prospects of Ispat Industries brought at Rs.25. Can I hold the stock for long-term? If yes, then what rate can be expected? Ashok Ladda

Ispat Industries (Rs 31.9): Ispat Industries is a very volatile stock with a penchant for making sharp moves in either direction.

It recorded a peak at Rs 87 in December 2007 before plunging southwards as anticipated in our review of this stock last December.

The stock has not been able to move strongly past Rs 100 over the past decade.

This stock is not recommended for long-term investors or for investors with a low risk appetite.

Though it can move up to Rs 50 or Rs 65 over the next one year, it can reverse sharply from either of these levels and move lower again.

Investors with a shorter horizon can exit the stock at either of the levels mentioned above.

Suggested stop loss is just below the March trough at Rs 26.

Please advice me on the prospects of Exide Industries bought at Rs 80 and Geojit Securities purchased at Rs 63. Kannan

Exide Industries (Rs 71.4): The long-term structural bull market continues to be in force in Exide Industries.

Despite the steep correction witnessed in February and March, the stock continues to be above its long-term trend line that is positioned at Rs 64.

In other words, the positive view for the long-term will be negated only if the security declines below this support. This stock has the potential to move beyond Rs 90 over the next two years.

Geojit Financial Securities (Rs 56.8): Geojit Financial Securities is reversing from its long-term support at Rs 45.

Since the stock spent five months consolidating in the band between Rs 40 and 50 before moving higher in December 2007, this area would be a significant support band for the stock.

However, the up-moves in the stock in the near-term might not be strong enough to propel the stock beyond Rs 75.

Investors can book profits in short term rallies to this level. A strong breakout beyond Rs 75 is needed to take Geojit Financial Services to Rs 100.

Please advise me on Subex. I bought this stock at Rs 210. Should I hold it or exit? Venu

Subex (Rs 144.6): Subex is in a vicious downward spiral since July 2007.

It is currently well below the long-term trend deciding level at Rs 300.

The sequence of lower peaks and troughs since the second half of 2007 and the fact that even minor recoveries in the stock is being met with bouts of profit booking means that the stock can move lower over the medium term.

The next long-term support lies at Rs 114.

You can hold the stock with a stop at Rs 110.

The other alternative would be to exit the stock at current level and reinvest once it records a weekly close beyond Rs 315.

— Lokeshwarri S.K.

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