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

Arvind Mills (Rs 14.2): In our previous review of Arvind in July this year, we had written that investors should hold the stock with a stop at Rs 27 but a slide to Rs 18 was likely over the medium-term.

The savage sell-off in October has dragged the stock price below this support and it currently appears to be headed towards the 2001 trough at Rs 7.

Since the stock has not formed a sustainable bottom yet, it would be best to switch to some other stock. Key resistance level for the year ahead is at Rs 43.

Gujarat NRE Coke (Rs 30.1): Though Gujarat NRE Coke plunged from Rs 129 to Rs 71 in the first quarter of this year, it recovered very swiftly and was holding firm above Rs 105 up to June this year.

But the sharp decline since September has dragged the stock to abysmal depths. It is currently close to its December 2006 trough at Rs 19. Long-term investors can hold the stock with a stop just below this level. A significant trough is possible here.

However, a weekly close below Rs 19 will imply that the stock is returning to sub-Rs 10 level.

Resistances over the next 15 months would be encountered at Rs 43, Rs 56 and then Rs 71.

The long-term view will turn positive only on two weekly closes above Rs 71.

Kindly let me know whether I should hold Yes Bank bought at Rs 240 or sell it by booking loss. R M Kumarappan

Yes Bank (Rs 68.2): In our last review of this stock in July 2007, we had indicated that it could rally up to Rs 258 and had suggested a stop loss at Rs 160.

Yes Bank reversed from the peak at Rs 277 in January and has currently ceded all the gains made since its listing.

Limited history makes it difficult to identify the next support on the charts. However the stock is currently putting up a fight around Rs 55.

Long-term investors can give the stock another 20 per cent leeway to decline further and hold with a stop at Rs 54. The stock could consolidate in the band between Rs 40 and Rs 60 as it builds a base from which to launch the next up-move.

Resistances for the year ahead would be at Rs 100 and then Rs 140.

I have purchased Adlabs Films at Rs 420. Please give your view on this stock. R Koteswara Rao

Adlabs Films (Rs 163.3): This stock has been spiralling downward blindly since the beginning of this year, shattering one support level after another with remarkable ease.

The key long-term support at Rs 740 was breached in March and the stock moved emphatically below its long-term trend-line towards the end of June thus signalling the onset of a long-term correction. It is currently hovering near its 2006 lows at Rs 171.

There is a support band between Rs 145 and Rs 170 that can cushion the current decline. However, a strong decline below Rs 145 will drag the stock to double digits to Rs 88 or even Rs 63.

Investors can hold the stock with a stop at Rs 140. Short-term resistances for the stock are at Rs 300 and then Rs 400. The long-term view will turn positive only on a weekly close above Rs 750.

Can I buy Sun Pharma at current levels or wait for further reduction in prices? I can hold it for 2 to 3 years. S Jegadeesan

Sun Pharmaceuticals Industries (Rs 1,118.2): Sun Pharmaceuticals Industries has been one of the most resilient stocks in the correction this far.

It is one of the rare few that recorded a new life-high in September. But the correction over the last two months has been savage and the stock is currently down 27 per cent since this peak.

The long-term trend-line at Rs 1,300 was also breached in October. Two weekly closes above this level are required to make the long-term outlook positive again.

However if we consider the retracement of the up-move in this stock since the 2003 trough, 30 per cent retracement is already complete and the stock can rebound from these levels.

Next long-term support is present at Rs 1,020. Investors can accumulate the stock in declines with a stop at Rs 1,000.

It would be best to steer clear once the stock declines below Rs 1,000 since the next halt can be at Rs 850 or Rs 650.

Investors already holding this stock can continue to do so as long as it trades above Rs 650. Key resistance levels for the year ahead would be at Rs 1,300 and then Rs 1,400.

Kindly advise me on Gujarat Mineral Development Corporation. I am a long-term investor. Sanjay Vaswani

Gujarat Mineral Development Corporation (Rs 49.2): In our previous review of this stock in March, we had indicated that the long-term view on the stock would stay positive as long as it held above Rs 135 (price adjusted for the 1:1 bonus shares issued since then).

GMDC penetrated this level emphatically in August and the stock price is now back to the February 2007 prices.

If we consider the long-term chart of this company, it had been meandering sideways below Rs 50 since 1998, before it caught traders’ fancy in 2007 and began galloping higher.

The correction this year has wiped out the multi-fold gains made in 2007 and the stock appears to be returning to its long-term base below Rs 50. Immediate support levels are at Rs 23 and then at Rs 12. The stock is likely to spend a few more years in the long-term range between Rs 10 and Rs 50 before making any headway.

Please let me know the future prospects of United Phosphorus bought at Rs 320 and Shasun Chemicals and Drugs at Rs 140. R M Kumarappan

United Phosphorus (Rs 106.2): You have bought this share at cum-bonus price and your ex-bonus cost works out to Rs 160.

United Phosphorus had been moving in a broad sideways range since the last quarter of 2005. The lower boundary of this range was penetrated in the first week of October and the stock has lost 50 per cent of its value since then.

Key long-term support is present at Rs 80 and there is another long-term support just below at Rs 65 that was the trough formed in March 2005.

Investors can hold the stock as long as it sustains above Rs 65 on a weekly basis. Though this level was tested last Monday, there has been a strong rebound that has taken the stock 30 per cent higher in just three trading sessions.

Resistance levels for the ensuing year would be at Rs 120 and then Rs 155. Investors with a shorter investment horizon can sell their holdings at either of these levels.

Shasun Chemicals and Drugs (Rs 15.7): In our review of Shasun Chemicals in April this year, we had indicated that the short-term rally from the Rs 35-trough would face resistance at Rs 65 or Rs 84 and these levels would be difficult to surpass over the ensuing three months.

The stock reversed from Rs 65 on April 29 and has been sliding lower in a relentless fashion since then. Immediate support on the long-term charts is the 2002-trough at Rs 13.2. But the stock could easily plummet to its 2001 trough at Rs 5.8.

The magnitude of this fall denotes that the stock could take more than two years to re-claim your cost price.

On the other hand, there are no signs of a sustainable reversal yet and the stock could decline further over the ensuing months.

We recommend a switch from this stock at current levels. The medium-term view will turn positive only on a weekly close above Rs 68.

— Lokeshwarri S.K.

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