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

Idea Cellular (Rs 89.9): In our previous review of this stock in September 2007, we had expected the stock to reverse higher from the support zone between Rs 100 and Rs 110. But the stock market sell-off this year has dragged Idea Cellular way below this level to finally form a trough at Rs 74 in July. Following a sharp reversal from this trough, the stock is currently consolidating in the band between Rs 85 and 95. This short-term up-trend can continue to take the stock price higher to Rs 97 or Rs 105 over the next three months. The near-term outlook will turn negative only on a decline below Rs 80.

The stock will however face strong resistance from the band between Rs 100 and Rs 110 over the next one year and it could spend this period moving in a band between Rs 75 and 110. Investors with a long term perspective should hold the stock and use declines below Rs 80 to accumulate it.

I am holding Indiabulls Securities purchased at Rs 100. Can I buy more shares in this company at current level? Jagjit

Indiabulls Securities (Rs 78): This stock made a trough at Rs 57.5 in the last week of July and is currently attempting a recovery.

It is not advisable to buy more shares at this juncture since it cannot be ascertained if a long-term bottom has been formed already or if it has some way to go further. Lack of history makes it difficult to identify supports below Rs 57.5.

Hold the stock with a stop at Rs 55. The current rally can take the stock higher to the resistance zone between Rs 88 and 90, where you can divest your holdings. Fresh investments can be considered only on a strong close above Rs 100.

I hold the stock of Abhishek Industries and Lakshmi Machine Works. What is the target price for the above stocks for the medium and long term? T Raveendran

Abhishek Industries (Rs 15.3): This stock has been in a long-term correction since September 2005. Though it spurted higher in December 2007, these gains were entirely reversed in January this year.

The stock is currently hovering close to its long-term support at Rs 17. A reversal from this level can take the stock higher towards Rs 25 over the medium term. Investors with a medium-term perspective can divest their holding around Rs 25.

A move beyond this level would take the stock towards Rs 33 and then Rs 44 over the long term. However, a sideways move between Rs 12 and 25 is envisaged for the medium term.

Lakshmi Machine Works (Rs 1,203.2): In our previous review of this stock in July 2007, we had expected it to hold above the support at Rs 2,300. Lakshmi Machine Works however broke below this support after forming a classic double top at Rs 4,000 in February.

The decline this year has also taken the stock below the key long-term support at Rs 1,575. The negative long-term outlook for the stock would reverse only on a close above this level again.

The stock is currently trying to recover from the psychological support at Rs 1,000.

However, the recovery is very tentative and a decline to Rs 930 or even Rs 700 is possible over the next year. Medium-term resistances for the stock are at Rs 1,500 and then Rs 2,200.

Can I buy more shares to average IFCI bought at Rs 119? Sivakumar

IFCI (Rs 50.1): Your cost price is close to the life high in IFCI at Rs 121. The stock has been plumbing new depths since this peak.

Key long-term support for the stock is present at Rs 52. The stock is currently attempting to climb above this level. The negative long-term outlook will be mitigated on a firm close above this level.

However, it would not do to expect the stock to race back towards its previous peak any-time soon.

This stock recorded a peak at Rs 100 in 1994 and then took almost fourteen years to surpass this peak. IFCI moved below Rs 20 in the nine year period following September 1998. Hence, we do not recommend buying more shares of the stock with the intention to average.

The stock could face great difficulty in moving past Rs 65 over the next couple of years. We suggest divesting your holdings in medium-term rallies to the band between Rs 65 and Rs 70.

I bought Elecon Engineering at Rs 320 and DS Kulkarni at Rs 290. What is your view on these stocks as per current market condition? Is it worth-while buying more shares at current levels? Vikas

Elecon Engineering (Rs 118.2): This stock moved below the key long-term support at Rs 130 in June to record a 52-week low at Rs 80. But it is currently attempting to reverse from the next support band between Rs 80 and 100.

The sharp spike last week, accompanied by large volumes, implies that the stock could have formed a significant trough at Rs 80. Investors can hold the stock with a stop at Rs 78. Subsequent targets are Rs 67 and then Rs 48.

The stock could attempt to move higher towards Rs 144 or Rs 180 over the next year. Investors with a shorter investment horizon can exit at either of these levels. We never recommend averaging as a means to recoup losses.

DS Kulkarni (Rs 95): DS Kulkarni is an extremely volatile stock that has a penchant for taking investors on dizzying roller coaster rides. The long-term trend in this stock has been down since December 2006.

The decline since May has taken the stock to levels last seen in 2005. It is currently very delicately poised at the psychological support at Rs 100. But the absence of a meaningful reversal denotes that a decline to the next long-term support at Rs 75 and then Rs 63 is possible over the next one year.

Investors can switch out from this stock at current levels. Stop loss for those who wish to hang on should be at Rs 74.

Kindly let me know the technical outlook of NMDC. Kunal Gupta, Subur Basha Sheikh

NMDC (Rs 343.1): NMDC formed a classic triple top reversal pattern between November 2007 and May 2008 before reversing lower. It was only in the latest leg of the correction over the last two months that the stock has declined below the key long-term support at Rs 280.

That said the long-term outlook for the stock stays positive. NMDC is currently reversing higher after testing its long-term trend line.

The stock has immediate resistance at Rs 370 and then Rs 410. Investors with a medium-term horizon can divest their holdings at either of these levels.

A move beyond Rs 410 will take the stock towards the previous peak at Rs 500. Long-term investors can hold the stock with a stop at Rs 200.

I am short-term investor. At what level should I buy Bajaj Hindustan? Jitendra Surana

Bajaj Hindustan (Rs 180.9): Bajaj Hindustan is in a long-term bear phase since April 2006.

The rally in the last quarter of 2007 from Rs 115 to Rs 400 was only a bear market pull-back and the stock is once again near the August 2007 trough. The next long-term support for the stock is in the zone between Rs 120 and Rs 125 from where is reversed in June 2005 and again in August 2007.

The near-term trend in the stock is however up. Short-term investors can buy the stock with a stop at Rs 150. Long-term investors can buy the stock in declines with a deeper stop at Rs 115. The stock can rally to Rs 240 or Rs 300 over the next year.

I hold shares of Alembic purchased at Rs 50. How is the trend in this stock? Will it touch Rs 55 in near future? Alok Varshney

Alembic (Rs 44.4): This stock is hovering precariously close to its long-term support at Rs 42. Hold the stock with a strict stop loss at Rs 40. Since this is a key support, there can be short-term rallies from here to Rs 58 or Rs 66 where you can exit your holdings. However, sell the shares on a decline below Rs 42 since the subsequent targets are Rs 31 and then Rs 20.

— Lokeshwarri S.K.

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