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Kindly give your outlook for Tata Sponge purchased at Rs 300 and Motilal Oswal Financial purchased at Rs 800. Murthy

Tata Sponge (Rs 253): This stock has been correcting since the December peak at Rs 331.

But this correction is resulting in a shallow sideways move between Rs 200 and Rs 350 instead of degenerating into a deeper cut.

The long-term view on the stock stays positive and this view will be altered only on a decline below Rs 190.

If Tata Sponge sustains above Rs 190 over the next year, it can break-out higher to a new peak over the long-term.

For the medium-term, Tata Sponge can move sideways in a range between Rs 210 and Rs 320.

Investors with a medium term perspective can exit the stock around Rs 300.

Motilal Oswal Financial (Rs 762.4): Motilal Oswal Financial is currently trying to claw its way up from the trough at Rs 515 recorded in March.

But this recovery was halted at the first resistance at Rs 885.

Key short-term support for the stock exists at Rs 660. Recovery above this level will take the stock higher to Rs 928 and then Rs 1120.

But a decline below would mean that the stock is moving towards Rs 500 again.

Investors with a short-term horizon should hold the stock with a stop at Rs 650 and try to divest their holdings in the zone between Rs 1,000 and Rs 1,200.

The stock could struggle to move beyond Rs 1,200 in the next one year.

Can I buy SAIL at current levels? I can hold these shares for 2 to 3 years. K Sayinath

SAIL (Rs 153.7): Steel Authority of India is in a long-term down-trend since last December.

The stock completed a 3-wave corrective move at Rs 152 in April and has been moving in a sideways range between Rs 150 and Rs 200 in what appears to be base-building effort.

Despite the severity of the correction that has made the stock give up more than 50 per cent of the gains made since 2002, the long-term view on the stock is positive.

This view will be negated only on a decline below Rs 115.

However, we envisage a move between Rs 115 and Rs 300 in the stock over the next year.

Long-term investors can buy the stock in the zone between Rs 115 and Rs 150 with a stop at Rs 100.

Please give your view on Pioneer Embroideries bought at Rs 103 per share. Varsha Doshi

Pioneer Embroideries (Rs 76.1): This stock has launched a long-term correction after forming a classic double-mountain pattern in the weekly candle-stick chart.

This correction has pulled the stock below the key long-term support at Rs 100.

The near-term outlook for Pioneer Embroideries is also bleak and the stock has commenced a fresh leg of its downward move from the last week of April.

The stock could move lower towards the long-term trend line at Rs 60 and the August 2006 trough at Rs 56. Investors are advised to switch from the stock at current levels and consider re-investing if it closes beyond Rs 115.

I had bought Shasun Chemicals at Rs 140. Kindly advise whether to hold it or book losses. K M Kathiresan

Shasun Chemicals (Rs 50.8): This stock struggled with the resistance at Rs 100 in the three years between 2004 and 2007.

Though it broke above this ceiling in the second half of 2007 to record a peak at Rs 157, this proved to be a false break-out and the stock subsequently commenced a long-term correction.

This decline has dragged the stock well below its key long-term support at Rs 60.

The recovery from the March trough has already reversed and the stock is likely to move lower towards its long-term trend line positioned at Rs 30 over the next year. We recommend a switch from this stock at current levels.

The medium-term outlook will turn positive only on a close beyond Rs 90.

I am a long term investor and I use weekly chart of closing prices of stock for stop loss purpose. If I keep a stop loss for a particular stock should I wait for the price to close below the stop on a weekly basis or wait for a close on daily basis to exit? If I wait for a weekly close in a falling market, the price might fall further. Seshan Narayanan

Filters are maintained in the form of two or three consecutive closes (daily, weekly monthly and so on) in order to avoid whipsaws in which the stock moves below the stop loss briefly and then moves higher again.

Long-term investors should wait for at least one weekly close (if not two) below the stop loss before exiting the stock.

The reason is that the stop losses are determined based on technical support levels and other technical tools.

The stock could recover after briefly testing these levels. Short-term investors can sell their holding once the stock closes below the stop loss on a daily basis.

There would of course be a risk that the stock could decline further as we wait for the close on a weekly or daily basis.

But this is a risk that needs to be taken in order avoid getting whipsawed out of a good long-term holding.

I have purchased Hotel Leela at Rs 51 and Dena Bank at Rs 55. Please advise whether I should hold the stock or exit. C H Viswananth

Hotel Leela (Rs 40.7): In our past reviews of this stock, we have stressed that it has key long-term support between Rs 35 and Rs 38.

Hotel Leela has bounced off this support thrice in the period between August 2007 and March 2008.

Long term investors can hold the stock as long as this level holds. If this support is breached, it can be a free-fall thereafter, to Rs 10.

But things might not get that dire for Hotel Leela for it has been moving in a broad range between Rs 40 and Rs 90 since April 2006.

Some profit booking is advised the next time the stock nears the upper ceiling of this range.

Dena Bank (Rs 48.2): This stock has lost over 50 per cent of its value since the January peak at Rs 99, but the long-term outlook in the stock remains positive.

This view will be reversed only on a monthly close below Rs 40. In that event, the stock would move lower to the long-term band between Rs 20 and Rs 40 which confined it in the period between October 2003 and May 2007.

The medium term outlook for the stock is negative and it seems to be on course to test the long-term support at Rs 40, mentioned above.

There is a strong resistance at Rs 65 that would act as a ceiling over the next three months.

Please tell me the technical outlook of KCP and Gremach Infrastructure. Jagjit Singh

KCP (Rs 334.7): KCP is sliding inexorably since the beginning of this year and this decline has dragged the stock below the key long-term support at Rs 450.

The stock would now need to close above Rs 550 to mitigate the negative long-term outlook. Close below the March trough at Rs 350 is a point of concern.

The immediate support for the stock is where it is currently halting, at Rs 320.

If this is level is penetrated, KCP can decline all the way down to Rs 250. Investors should sell the stock once it moves below Rs 320 and look for opportunity to enter between Rs 200 and Rs 250.

Gremach Infrastructure Equipments and Projects (Rs 121.1): This stock has been in a vicious decline since January 8 as it tumbled from the peak at Rs 504 to Rs 104.

The attempt at a fight back in March was arrested at Rs 171 and the stock has resumed its downward trajectory.

It is always good to steer clear of stocks that repeatedly hit the upper or lower circuit filters.

The extremely thin volumes on this counter also increases the impact cost and makes it amenable to price manipulation.

The immediate support for the stock exists at Rs 110. Once this level is penetrated, a decline to Rs 80 would be on the cards.

Medium-term resistances would be at Rs 200 and Rs 260.

— 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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