The Hindu Business Line : Query Corner : What the charts say

Arvind Mills (Rs 34.6): The decline from the intermediate peak at Rs 93 in January has been extremely severe and has pulled Arvind Mills below its key long-term support at Rs 60. The stock faces an uphill task in engineering a turnaround from these levels. It is currently halting at the support at Rs 27 but a slide all the way to the next support at Rs 18 is likely over the medium term.

The negative bias for the medium-term will be mitigated only on a weekly close above Rs 55. Investors should consider investing in this stock only if it moves beyond this level. Those holding the stock can do so with a stop below the recent trough at Rs 27.

Eveready Industries (Rs 34.6): This stock has been in a structural down-trend since September 2005. The medium-term rallies have been followed by the stock forming a lower trough. The recent rally from Rs 40 to Rs 75 in the last quarter of 2007 has also been completely dissipated and the stock is currently hovering around the support at Rs 30. Though the stock can move higher to Rs 37 or Rs 42 in the short-term such rallies should be utilized by investors to divest their holdings. The medium-term outlook will turn positive only on a close beyond Rs 52.

Investors holding the stock can switch to some other stock since Eveready Industries can decline further towards Rs 20 over the next six months.

I am holding shares of Greaves Cotton bought at Rs 390. Should I hold these shares or dispose at a loss? N S Ganesan

Greaves Cotton (Rs 182.5): Greaves Cotton moved in a sideways range between Rs 275 and Rs 400 from May 2006 to February this year. This long-term trading range was conclusively penetrated in March and the stock has been trending lower ever since.

The immediate support lies in the band between Rs 150 and Rs 175. Investors can hold the stock as long as it sustains above Rs 150. A long-term reversal is possible here and those wishing to buy with a long-term perspective can also accumulate the stock in this band.

But it would be best to dispose your shares on the penetration of the Rs 150 support since the next support for the stock is at Rs 65. Resistances for the ensuing year would be at Rs 250 and then Rs 280. The medium-term perspective would turn positive only on a move beyond Rs 280.

I am holding shares of NTPC purchased at Rs 200 and Natco Pharma bought at Rs 99. Please let me know the medium and long-term outlook for these shares. S R Deepthi

NTPC (Rs 187.5): In our previous review of this stock in March, we had expected the support at Rs 180 to hold. But we had also indicated that if that support was breached, the next target would be at Rs 130. NTPC declined below Rs 180 in May to record a trough at Rs 148 in June. This decline has also taken the stock below its long-term trend line.

Though the stock is attempting a recovery from the June trough at Rs 148, this move would face strong resistance between Rs 200 and 210 where the long-term trend line is positioned.

Weekly close above this zone is required to signal the resumption of the medium term up-trend.

Investors with a short-to-medium term perspective can exit the share on a failure to surpass this zone. A sideways move between Rs 150 and Rs 200 is quite likely in the medium term.

However, there is a strong long-term support between Rs 130 and 150. Long term investors can accumulate the stock every time it declines towards Rs 150. The stock would surpass its previous peak over the long-term.

Natco Pharma (Rs 67.1): Natco Pharma has not done anything since 2004; staying in a sideways range between Rs 60 and Rs 150. The current decline has brought the stock close to its long-term floor once again. Hold the stock as long as this support holds. A reversal from here can pull the stock towards the upper ceiling of its long-term trading band over the long term.

However, it would be best to sell your holding on a weekly close below Rs 60 since the next long-term support is present at Rs 37. Medium-term resistances would be at Rs 81 and then Rs 94.

I hold shares of South Indian Bank purchased at Rs 100 and Biocon bought at Rs 535. Please let me know the outlook for these stocks. Viswanadham

South Indian Bank (Rs 107.6): This banking stock too has been zigzagging its way down since January this year, resulting in an erosion of more 60 per cent of the stock’s value from the peak. However, the long-term outlook for the stock has not yet turned negative since the stock is holding above the long-term trend line.

The zone between Rs 95 and Rs 105 needs to be keenly watched in the days ahead. Close below this zone would reverse the positive long-term view for this stock. Key medium-term resistance is at Rs 158. Short-term investors can sell their holdings if the stock struggles to move past this level over the upcoming months.

Biocon (Rs 367.3): Biocon took a hard knock between November 2007 and January 2008, tumbling from the peak at Rs 663 to Rs 345 in this period. The rally that ensued has since been eroded in the renewed bout of selling from April and the stock is once more testing the long-term support band between Rs 300 and 350.

If we view the long-term picture, the stock has not made any headway since its listing in 2004 and has been vacillating in the range between Rs 300 and 650. As the stock is close to the floor of this trading range, it can be hoped that it would reverse from here to move higher to Rs 450, Rs 520 and finally to Rs 600 over the next two years.

Investors with a long-term perspective can hold the stock with a stop at Rs 300. Medium-term investors can divest their holdings at either of the targets cited above.

I have bought shares of Tata Teleservices Maharastra at around Rs 50 per share. Can you please advice me on its short and long-term prospects? I am a long-term investor and I can hold this share for another 2 or 3 years. Dr C J Kennady

Tata Teleservices Maharashtra (Rs 26.1): As indicated in our previous review of this stock, the long-term view on TTML has turned negative since the stock has closed conclusively below the long-term trend deciding level at Rs 27. Investors can take heart from the fact that the stock is hovering just below this support and the long-term outlook can be salvaged if it manages a weekly close above Rs 27.

The tentative sideways move recorded from the first week of July implies that TTML can slide lower to the next long-term support band between Rs 15 and 17.

The stock could move in a broad range between Rs 15 and Rs 50 over the next two to three years. Hold part of your holdings with a stop at Rs 15 and switch the rest in to some other stock with stronger growth prospects.

I have purchased shares of Cairn India at the rate of Rs 242 and Strides Arcolab at Rs 148. Shall I exit the stock or hold it? S Kamal

Cairn India (Rs 221.8): Cairn India is among the rare few that recorded a new peak in May. However despite the 40 per cent correction from this peak, the structural up-trend continues to be intact. Long-term investors can hold the stock as long as it holds above Rs 175.

The stock can reverse from the zone between Rs 175 and Rs 200 and move towards the previous peak again.

The medium-term resistance for the stock would be at Rs 264 and then at Rs 294. Investors with a shorter horizon can divest their holdings at either of these levels.

Strides Arcolab (Rs 190.4): This stock is currently attempting to form a base between Rs 110 and 120. The current up-move that began from the July trough at Rs 112 can take the stock higher to Rs 200 or Rs 215.

Reversal from this level can make the stock move between Rs 120 and 200 for a few months. Rally beyond Rs 215 would imply that the stock is heading to Rs 250 or Rs 280.

— Lokeshwarri S.K.

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