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

I am holding shares of HCL Infosys and Sesa Goa bought at Rs 110 and Rs 145 respectively. Shall I hold these shares or switch. What is the anticipated bottom price? P. P. Janardhanan

HCL Infosys (Rs 103.5): In our previous review of this stock last October, we had expected the stock to move higher to Rs 250 or Rs 280. We had suggested the stop loss level for long-term investors at Rs 160. The stock recorded a peak at Rs 300 in January and subsequently declined below our long-term support to the recent trough at Rs 93.

Immediate support for the stock is at the May 2004 trough at Rs 90. Since the long-term trend-line is also positioned there, investors can hold the stock as long as it holds above this level.

The alternative course of action would be to exit at current levels and consider re-entry on a weekly close above Rs 120.

The stock would face resistance from the band between Rs 160 and Rs 180 over the next year. Investors with a shorter investment horizon can divest their holding in this zone.

Sesa Goa (Rs 116.8): This stock declined very sharply in the first half of September to form a trough at Rs 99 on September 18. The Rs 100 level is a significant psychological support for the stock. A sustainable trough is possible at this level.

However, if the stock declines below, the next support on the long-term charts is at Rs 86.

The stock spent almost 5 months oscillating around this level in 2007. We do not expect this support to be breached. Long-term investors can hold the stock as long as this level holds.

Immediate resistance for the stock is at Rs 132. If this level is surpassed, the stock could move to the next resistance band between Rs 150 and Rs 160.

Investors with a medium-term perspective can divest their holdings on a failure to surpass this zone.

However a move towards Rs 170 or even towards its former peak at Rs 220 is possible over the next one year.

Kindly advise the future of SPIC and Flawless Diamond. Sanjay Vaswani

SPIC (Rs 22.3): SPIC enjoyed its time in the lime-light in the bull phase in 1991-92 when the stock rallied from Rs 32 to Rs 242.

But it slid incessantly lower since then until it reached a nadir in March 2003 when it bottomed at Rs 4.

The stock has been trying to move higher since then and has moved above its long-term trend line too. However, a lot more ground needs to be covered before the stock can be pronounced as being in a sustainable up trend.

SPIC has been moving in a wide range between Rs 20 and Rs 40 since December 2004.

The stock is currently close to the lower boundary of its long-term term trading range. Investors can hold the stock with a stop at Rs 15. If this level holds, the stock can move up to Rs 34 or even Rs 45 over the next two years.

Flawless Diamond (Rs 45.5): This stock is also halting close to its long-term support at Rs 50.

The long-term outlook for the stock is however negative since the decline from the December 2007 has been very sharp and the intermittent recoveries have been very tepid and lacking in conviction. Immediate supports for the stock are at Rs 40 and then at Rs 32.

We recommend a switch from this stock at current levels.

I have bought Lloyds Electricals and Engineers at Rs 160 and Lok Housing at Rs 226 last January. Can you please tell me what the charts say about these stocks for the short to medium-term? K. Kanagaraj

Lloyds Electric (Rs 64.4): In our previous review of this stock last March, we had mentioned that long-term investors need not get perturbed unless the stock declined below Rs 95.

The stock declined below this support in June and is currently also below the long-term support at Rs 77.

There are no reliable supports for the stock on the long-term chart below Rs 77 since it moved up vertically from Rs 7 to Rs 80 in the period between August 2004 and March 2005.

It would be best to sell the stock if it declines any further and re-invest in this counter once it records a weekly close above Rs 110.

Short-term resistances would be at Rs 82 and then Rs 95. A close beyond Rs 110 in required to signal that the stock is out of the woods.

Lok Housing (Rs 37.5): Lok Housing appears to be plunging in to a bottom-less pit.

The stock breached the key long-term support at Rs 130 in May this year and has been recording new multi-year lows ever since.

Subsequent supports on the long-term charts are at Rs 40 and then at Rs 20. But there is a strong likelihood of Lok Housing retreating to its long-term base between Rs 3 and Rs 10, between which it moved in the period between 1997 and 2004.

Since it would take many years for the stock to rise up to your purchase price, we advise a switch to some other stock with better prospects as it would help to unlock the money locked up in this investment.

I have purchased Reliance Communications at an average price of Rs 510. I am contemplating investing in Yes Bank. Please give your view on these stocks. Subur Basha Shaikh.

Reliance Communications (Rs 347.5): Reliance Communication is currently in a long-term down-trend following the double top formation between November 2007 and January 2008.

This correction has pulled the stock below the key support level at Rs 435.

Short-term investors can hold the stock with a stop below the recent trough at Rs 320.

However short-term chart pattern suggests that it can decline to Rs 325 or even Rs 270 in the near term.

Short-term resistance levels are at Rs 380 and then Rs 435. Fresh investment is recommended in this stock only if it records a weekly close above Rs 435.

It would be advisable to exit your holding on a decline below Rs 325 since it will open the possibility of a re-test of the stock’s all-time low at Rs 186.

YES Bank (Rs 124.5): Though YES Bank has declined below its key long-term support at Rs 140, it is holding above the long-term trend-line that is positioned at Rs 115.

Aggressive investors can buy the stock between Rs 100 and Rs 110 with a stop at Rs 90.

Risk-averse investors can wait for a weekly close above Rs 140 before investing in this stock. The resistances over the next year would be at Rs 170 and then Rs 210.

I am holding Lanco infra at Rs 290. Please give me the technical outlook for this stock. Jodh Singh.

Lanco Infratech (Rs 185): This stock is in the grips of a strong bear-phase.

The fact that every medium term rally has been followed by a lower trough indicates the lack of strength in the stock. It is currently declining steeply from the September 8-peak at Rs 325.

There are no signs of a reversal or stabilisation yet. The stock appears headed towards the next support at Rs 156 and finally towards its life-time low at Rs 137.

We recommend a switch from this stock at these levels.

— Lokeshwarri S.K.

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