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

Essel Propack (Rs 25.5): In our previous review of this stock in May 2007, we had advised investors to hold the stock as long as it held above Rs 60. We had also recommended an exit if the stock struggled to move beyond Rs 85. Essel Propack reversed from the peak at Rs 81 in January this year and is currently testing the trough formed in 2003 at Rs 25.

Though it is attempting to form a base at this support, the chart patterns are far from bullish and a slide towards the next long-term support at Rs 16 or Rs 12 is possible over the next six to nine months.

This negative outlook will be mitigated only if the stock manages a close above Rs 45. Investors can hold with a stop at Rs 22 and exit in short term rallies to Rs 37 or Rs 45.

Financial Technologies (Rs 1,401.8): Despite the correction since January pulling the stock price below our long-term support at Rs 2,180, Financial Technologies has held out relatively well in the recent rout. The stock has given up only 50 per cent of the gains recorded since 2003.

Since March it has been trying to form a base between Rs 1,350 and Rs 2,000.

This range-bound movement can continue over the next six to nine months. Investors with a medium-term perspective can exit the stock as it nears the upper boundary of this range.

A move beyond Rs 2,000 can take the stock to the subsequent targets at Rs 2,200 and Rs 2,400.

The long-term trend will resume only if the stock manages a move beyond Rs 2,400.

Conversely, a decline below Rs 1,370 can drag the stock to the next long-term support at Rs 1,170. Long-term investors can hold this stock as long as it sustains above this level.

I have been holding the shares of Ruchira Papers and Birla Ericsson over the last year and a half. Should I continue to hold them or sell? Ganesh Meenakshi Sundaram

Ruchira Papers (Rs 12.5): Since this stock has declined to its long-term support-band between Rs 10 and 11, it does not appear prudent to divest your holdings at these levels.

You can hold the stock with a stop at Rs 10. There can be rallies to Rs 17 or Rs 20 over the medium term when you can exit this counter. .

Birla Ericsson (Rs 14.6): Birla Ericsson too is drawing close to its long-term base around Rs 10. The stock is likely to halt the current decline at these levels. Investors can hold the stock as long as this level holds.

A rally to Rs 25 is possible over the next year where part of the holdings can be divested.

I hold shares of Kotak Mahindra Bank purchased at Rs 1,230. What is the future outlook for this stock? Manoj Bansal

Kotak Mahindra Bank (Rs 568.8): Kotak Mahindra Bank has a key long-term support at Rs 560.

Though it declined below this level in July, the recovery since then took the stock to a peak at Rs 670. The strength in the recovery leads us to hope that a long-term trough is possible for the stock in the zone between Rs 400 and Rs 550.

Long-term investors can hold the stock as long as it sustains above Rs 400. The stock can rally towards Rs 1,050 and Rs 1,435 over the next two years.

That said, stiff resistance will be encountered at Rs 700 and then at Rs 880 over the next six months.

A sideways move between Rs 400 and 800 seems likely for the stock over the medium term. Investors with a shorter investment horizon can sell the stock if it struggles to surpass the upper boundary of this range.

The short-term support for KMB is at Rs 520. A reversal above this level will ensure that the current up-trend can take the stock higher towards Rs 670 or Rs 800.

I had bought Prism Cement at Rs 40. I am a short-term investor. What is the future view of this stock? Vinoth

Prism Cement (Rs 34.9): Prism Cement is currently reversing from the long-term support at Rs 32. The stock has not breached this level effectively over the last two years.

Investors can hold the stock with a stop at Rs 29. However, the stock is likely to remain volatile over the short-term.

A decline to Rs 32 or even Rs 30 is possible as the stock moves in the band between Rs 30 and Rs 48. Near-term resistances are at Rs 42 and then Rs 48.

I hold shares of Pioneer Embroideries purchased at Rs 52. Please let me know the future outlook on this stock. K Ashok Kumar

Pioneer Embroideries (Rs 37.3): The stock has been decimated since January this year as it was dragged from the peak at Rs 345 to current levels. The next support band for the stock is between Rs 32 and 34.

However, the stock has been in a relentless down-trend with no meaningful rally since March this year.

Resistances for the short-term would be at Rs 65 and then Rs 83. It would be best to switch from this stock at current levels.

Please furnish the outlook for Pratibha Industries and Tata communications. Also suggest whether they can be bought at these levels. K V N Reddy

Pratibha Industries (Rs 224.9): This stock has been vacillating in a wide band between Rs 150 and 400 since its listing in March 2006.

The recent market correction has yanked the stock from the upper end of this trading range towards the floor.

Immediate supports for the stock are at Rs 180 and then Rs 150.

Though Pratibha Industries is attempting to reverse from the first support, a decline towards the zone between Rs 150 and Rs 180 is possible in the medium-term. Investors can utilize such declines to accumulate the stock. A strong reversal from here would take the stock towards Rs 290 and then Rs 360 over the next year.

Tata Communications (Rs 419.1): Tata Communication has registered a smart rally from the July trough at Rs 332. The stock has formed significant troughs at this level in June 2006 and again in March 2007.

A long-term trough could have been formed here. The up-trend from this level has taken the stock beyond the medium-term down-trend line and also above the 50 day moving average.

Immediate supports for the stock are at Rs 408 and then Rs 390. Investors with a short-term perspective can buy the stock on a reversal from these levels.

A rally to Rs 508 or Rs 563 is possible over the next three months in this stock.

The long-term outlook will turn positive only if the stock rallies above Rs 614.

Please advice me on the technical outlook for KLG Systel and Parekh Platinum purchased at Rs 450 and Rs 11. S S Prasad

KLG Systel (Rs 398.4): The stock is currently trying to move higher from the trough at Rs 292.

The long-term supports for the stock exist at Rs 315 and then Rs 245. Investors with a long-term horizon can hold the stock as long as the second support holds.

KLG Systel will however face resistance at Rs 468 and then Rs 570 over the next six months.

Reversal from the first resistance would result in the stock moving in the range between Rs 300 and Rs 600 over the ensuing months.

Parekh Platinum (Rs 6.2): This stock has been confined in the broad range between Rs 5 and Rs 20 over the last six years.

Parekh Platinum is currently close to the lower boundary of this range. The stock rallies only in the final phase of the bull market when the bottom-rung stocks join the party.

Another rally, even to the recent peak at Rs 20 seems unlikely over the next two years.

Rallies can be capped at Rs 8 or Rs 11 over the medium term. Investors are advised to divest their holdings at either of these levels.

— Lokeshwarri S.K.

More Stories on : Technical Analysis | Stocks

Article E-Mail :: Comment :: Syndication :: Printer Friendly Page