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

This is the support band that is currently halting the decline. Despite the intra-day dip to Rs 63 on October 27, it closed the day above Rs 70. A long-term trough is possible in the zone between Rs 70 and Rs 100. However, if the lower boundary of this range is breached, the stock could decline to Rs 40.

Investors can hold the stock with a stop below the recent trough at Rs 60. There can be medium-term rallies to Rs 100 or Rs 125 where short-term investors can divest their holding.

A range-bound move between Rs 80 and Rs 120 is likely for a few months as the stock builds a base from where to launch a long-term up-move.

I have purchased shares of Kotak Mahindra Bank at an average price of Rs 500 and City Union Bank at an average price of Rs. 40. What are the prospects for these stocks? Venkatesh J K

Kotak Mahindra Bank (Rs 411.5): This stock has been in a very intense structural down-trend since this January with every peak followed by lower troughs. The downward moving waves have been stronger than the intervening rallies in this down-trend.

The stock declined below the key long-term support at Rs 550 in October and the decline accelerated from that point to take the stock to its June 2006 trough at Rs 231.

There is immediate support for Kotak Mahindra Bank in the band between Rs 200 and Rs 240. If this level is penetrated, the next support is at Rs 160.

Short-term resistances for the stock are at Rs 520 and then Rs 680. Inability to move above the second resistance would make the stock move in the range between Rs 300 and Rs 700 for a few more months.

Medium-term view on the stock would turn positive only on a close above Rs 680 and fresh purchases are recommended in this counter only on a move above this level.

City Union Bank (Rs 16.9): City Union Bank too is in a structural down-trend since this January.

After completing a three-wave down-move, the stock is currently attempting to pull back from the trough at Rs 13.1 formed on the Monday before Diwali.

This up-trend will face short-term resistance from Rs 20 and then from Rs 24. Key medium-term resistance would be in the band between Rs 24 and Rs 28.

Investors with a short-term horizon can exit at these levels. Medium-term view will turn positive only on a weekly close above Rs 24.

Kindly let me know whether I should hold Power Grid bought at Rs 89.20 or sell the stock and book loss? Anugrah Vijay

Power Grid Corporation of India (Rs 75.3): In our review of Power Grid Corporation in June this year, we had recommended exiting from this stock since the medium-term outlook was extremely weak.

We had also expected the stock to struggle to rise above Rs 115 or Rs 135 over the ensuing months. The stock reversed lower from the peak at Rs 105 in July and has since recorded a new life-time low at Rs 51.7.

The rebound from this trough has been very sharp. But the stock faces near term resistance at Rs 78 and then Rs 84.

The medium-term resistance band is between Rs 96 and Rs 110.

Reversal from the Rs 80 level will mean that the stock could decline to re-test its recent lows at Rs 51. Hold with a stop at Rs 50 and divest your holdings at either of the levels mentioned above.

I have purchased GVK Power at Rs 20. Please give your views on this stock. John Paul M

GVK Power (Rs 18.1): Though the long-term correction from December 2007 has dragged GVK Power to a life-time low at Rs 10.3, the stock is rebounding strongly from this level.

A morning star pattern is apparent in the weekly candlestick chart, that is a bottom-reversal pattern. Hold the stock as long as it holds above Rs 10.

Near-term resistances where the current rally can stutter are at Rs 22 and then Rs 30. Strong resistance band for the year ahead would be between Rs 40 and Rs 45.

The stock could struggle to get above this zone and fresh purchases are advised only on a weekly close above Rs 45.

What do the technical charts of Nagarjuna Constructions and Selan Exploration say? How much more downside is left in these stocks? Sonali

Nagarjuna Construction (Rs 66):We had expected the down-trend from the January peak in Nagarjuna Construction to halt above Rs 140.

But after hovering around this level in July, the stock moved firmly below in August and the chart is currently appearing very despondent.

The stock is in a short-term up-trend since the recent trough at Rs 40, but this move is not too convincing. A decline below Rs 40 can drag to stock to the long-term base between Rs 10 and Rs 20.

Near-term resistances are at Rs 77 and then Rs 100. Inability to surpass the first resistance would be a sign of further decline in the short term.

Key medium-term resistance would be between Rs 150 and Rs 170. The outlook for this stock would turn positive only on a weekly close above Rs 170.

Selan Exploration (Rs 159.2):

This appears to be one of the trading favourites on our bourses for the year 2008. The wild swings between Rs 110 and Rs 300 this year bear out this fact.

The rapidity of the declines as the stock moved from one circuit to another is also disconcerting. This stock is suitable only for those investors with a great penchant for risk.

The stock is hovering close to its long-term trend-line and a bounce from here can take it higher towards Rs 205 or Rs 250 once more. Conversely, a decline below Rs 127 will drag the stock to the next support at Rs 109.

I hold Wire and Wireless bought at Rs 47.50. Can I continue to hold these shares or should I book loss? Nizar A H

Wire and Wireless (Rs 11.7): Wire and Wireless has been sliding incessantly since January 2007. The spike in the last quarter of 2007 turned out be a flash in the pan and the decline continued to take the stock below Rs 10 in October.

It is obvious that the downside is limited from these levels and booking loss here does not appear prudent.

Hold the stock and try to exit in rallies.

Short-term rallies can face resistance at Rs 20 and then Rs 28. Important resistance band for the ensuing year is between Rs 47 and Rs 55.

I would like to have your opinion on Educomp Solutions. My purchase price was Rs 3,000. K N Khanna

Educomp Solutions (Rs 2,556.6)

Educomp Solutions penetrated the key support at Rs 2,000 in the second week of October but the stock is attempting to reverse from the next support at Rs 1,500.

The stock has formed a bullish reversal pattern on the weekly chart and has also recorded two weekly closes above the key support level at Rs 2,000.

A sustainable trough could be in place at the recent trough at Rs 1,515. Investors should hold the stock with a stop at Rs 1,400.

Subsequent supports on the chart are at Rs 1,250 and then at Rs 1,080.

Strong resistance will be encountered in the band between Rs 3,000 and Rs 4,000 over the next year. The medium-term view will turn positive only on a firm close above Rs 4,000.

— Lokeshwarri S.K.

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