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

I bought Hexaware Tech at Rs 125 and Graphite India at Rs 56. Kindly let me know the medium and long-term prospects of these stocks. Can I average Hexaware at current levels? R Nagarajan

Hexaware Technology (Rs 51.1): Hexaware Technology has been spiralling lower since December 2006 and is currently down 76 per cent from this peak. The stock has breached the key support level at Rs 88 this year and the subsequent supports on the chart are at Rs 32 and then Rs 21.

Though Hexaware Technology is attempting to stabilize at current levels, the recovery lacks conviction. Averaging at current levels can back-fire since it cannot be determined where the stock would finally bottom. Investors can exit the stock at current levels and consider re-entry on a weekly close above Rs 88. The other alternative would be to hold with a stop at Rs 45 and exit in short-term rallies to Rs 63 or Rs 70.

Graphite India (Rs 60.3)

The correction in the first quarter of this year in Graphite India dragged the stock to its key long-term support at Rs 37. But the stock has bounced back strongly from here asserting that the long-term view stays positive. This view will be threatened only on a weekly close below Rs 37. The stock has the potential to rally towards its previous peak at Rs 95 over the next two years.

Investors with a medium-term perspective can hold the stock with a stop at Rs 50. A rally towards Rs 67 or Rs 74 is possible over this time period.

I am holding shares of Patel Engineering Rs 765. Let me know about the future outlook for this share. Manoj

Patel Engineering (Rs 420.9): Despite the scary plunge from Rs 640 to Rs 286 in the three months from May this year, there is still some hope left for the investors in this stock. The stock reversed from the key support zone around Rs 300 in July and is currently trying to claw its way higher. Investors can hold the stock with a stop at Rs 285, where the long-term trend line is also positioned. The next long-term support is present at Rs 220.

The up trend from the July trough appears promising and can take the stock higher towards Rs 530 or Rs 587 in the medium term. The medium-term outlook will turn positive on a move beyond Rs 587, paving the way for a surge towards your cost price at Rs 765.

Please advice on the future of BILT purchased Rs 33. Viswanadham

Ballarpur Industries (Rs 33.7): This stock has been relatively unaffected by the recent market crash in 2008. Though it did decline to the trough at Rs 25 in the first quarter, there has been a strong recovery thereafter that has pulled the stock 40 per cent higher from this trough. The long-term trend in the stock continues to be up though the stock is frequently testing its long-term trend line since early 2007. Hold the stock with a stop at Rs 30. It can move towards the upper boundary of its trend channel at Rs 46 over the next couple of years.

I am holding shares in GMR Infra bought at Rs 202. Can I buy the stock in dips? Also can I buy Reliance Communications at current level? Where are these two stocks likely to bottom? P P Janardhanan

GMR Infrastructure (Rs 102): In reply to a query in March this year, we had advised investors to hold GMR Infrastructure with a stop at Rs 125. We had also identified the subsequent support for the stock at Rs 88. The stock declined below Rs 125 in June to form a trough at Rs 76.5. The stock fluctuated in the band between Rs 80 and Rs 90 in July before finally breaking out in August. The current rally has not progressed sufficiently to help us decide if a long term trough has been formed at Rs 76.5. Investors can however buy the stock in declines since it is not likely to decline below Rs 65 even if the recent trough is breached.

Investors with a shorter horizon can buy the stock with a stop at Rs 95. The current rally can extend up to the band between Rs 150 and 160 in the medium term.

Reliance Communications (Rs 423.9): This stock has key long-term supports at Rs 437 and then at Rs 371. Reliance Communications has been attempting to stage a turnaround from the area between these supports since the first week of July. Long term investors can make staggered purchases in this zone.

However, the sharp reversal from the July peak at Rs 541 implies that the stock could spend a few months in the band between Rs 400 and 600 before moving higher. Medium term target beyond Rs 600 is 705. Conversely, support below Rs 370 is at Rs 340.

I am holding Orbit Corporation purchased at Rs 240. What is the future outlook for this stock? Should I hold it or sell? Santosh

Orbit Corporation (Rs 287.9): This is one of the stocks that do not provide exit routes once they reverse downwards. The current rally in the stock would face resistance from Rs 310 and then Rs 344. Short-term investors can book profit on a failure to surpass either of these levels. The medium term resistance for the stock is present at Rs 570. A rally beyond this ceiling is highly unlikely over the next year. Stop loss for short term investors can be at Rs 266.

Kindly let me know the technical outlook of KEI industries. Lathika

KEI Industries (Rs 40.2): KEI Industries is in a severe down trend since the beginning of this year that has done irreparable damage to its structural bull market. The stock is currently halting at the July 2006 trough at Rs 40. Short-term chart patterns do not inspire confidence. Investors can hold the stock as long as this level holds. The subsequent downward targets are Rs 27 and Rs 18.

Can you please suggest the short term outlook for Clutch Auto purchased at Rs 86? Hameed

Clutch Auto (Rs 38.6): Clutch Auto is in a short-term up trend from the trough formed at Rs 31 in July. The short-term outlook stays positive as long as this low holds. Short-term targets for the stock are Rs 45 and then Rs 55. Investors should divest their holdings in short-term rallies and switch to another stock since it faces an up-hill task in moving towards your cost price at Rs 86. The sharp slide from Rs 130 to Rs 30 this year implies that investors would flock to book profit at every rally thus arresting up trends. A close beyond Rs 76 is needed to make the medium-term outlook positive again.

I hold shares of Nagarjuna Fertilizers and Chemicals purchased at Rs 10. Please let me know the short and medium-term outlook. Shivaram S.

Nagarjuna Fertilizers and Chemicals (Rs 41.1): In our previous review of this stock in early 2007, we had been skeptical about its ability to move past Rs 22. But the stock soared in a spectacular fashion in the second half of 2007 and finally peaked at Rs 89 in January. The long-term up trend from the 2003 trough has ended at this peak and the stock is hovering around the key support at Rs 36 over the last six months. Over the medium-term, NFCL can move within between Rs 30 and 55.

—Lokeshwarri S.K.

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