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

Indiabulls Financial Services (Rs 100.9): This stock is one of the worst hit in the recent market melt-down; having lost almost 90 per cent of its value since the peak at Rs 1,028 in December.

All the key long-term supports have been shattered in the stock. It is currently attempting to stabilize itself around the June 2006 lows. The next support on the long-term charts is at Rs 73 and then Rs 65.

Investors can hold this stock as long as it holds above Rs 65 on a weekly basis.

But the recovery so far has been tentative and the current up-trend will face resistance at Rs 182 and then Rs 244 in the short-term. The medium-trend will turn positive only on a close above Rs 400.

Indiabulls Real Estate (Rs 109.4): Indiabulls Financial Services made an all-time low at Rs 84 on October 13 and is currently trying to claw its way upwards.

This short-term up-trend halted in the first week on November and the speed with which the stock has been declining since then means that a new low is likely to be formed soon.

Since the stock has limited history, it is not possible to identify the support below Rs 84. Investors can switch out of the stock at current juncture.

The view on this stock will turn positive only on two weekly closes above Rs 250.

I have purchased Suzlon Energy at Rs 46. Should I hold the stock or sell and book profit? What are support and resistance? What is the link to know support and resistance of various stocks? Rajesh

Suzlon Energy (Rs 54.5): In our review of Suzlon in August this year, we had anticipated a decline towards Rs 155.

But the stock’s decline in October pulled it to an unimaginable level at Rs 42. It however gained over 70 per cent from this trough when it peaked at Rs 75 on November 10. A short-term correction is currently underway.

Since you have purchased the stock close to its life-time lows, hold it with a stop at Rs 40.

Investors with a shorter investment perspective can hold with a higher stop at Rs 52.

If it manages to hold above Rs 50 in the near term, the up-trend can continue to take the stock higher towards Rs 86 or Rs 118.

Key medium-term resistance zone would be around Rs 200.

Risk-averse investors can wait for a close beyond Rs 200 before buying the stock.

It is not possible to obtain these levels ready-made from any web-site.

They need to be obtained by studying charts. But it may interest you to know what supports and resistances are. We reproduce excerpts from our column “Trader’s corner” published on January 6 to explain that:

"All graphs contain innumerable peaks and troughs. The troughs would be the supports and the peaks would be the resistances. The question that is frequently asked by beginners is: which peaks or trough would be the most relevant at any given point?

The answer would depend on where the security’s price is positioned.

Once the price starts falling, look at the nearest and the most recent trough. That would be the immediate support.

Once this trough is breached, the next lower trough to the left can be considered as the support.

Similarly, once the stock price begins moving higher, the immediate resistance would be the nearest and the most recent peak.

If this is surpassed, the next peak at a higher level would be the resistance."

I would like to have your opinion on Oswal Chemicals purchased at Rs 13. Please advise me whether to hold the stock or to sell it and book loss. Narayana Reddy K

Oswal Chemicals (Rs 10.9): The four-year old bull-phase in Oswal Chemicals ended at Rs 78 in January and the stock has since given up most of the gains recorded in this period.

A short-term trough has been formed at Rs 8.6 on October 29 and a fledgling up-trend is unfolding since then. Short-term investors can hold the stock with a stop at Rs 10. A reversal from this level will take the stock higher to Rs 15 again in the near-term.

The medium-term view on the stock is however negative and investors ought to divest their holdings in rallies.

Please advise me on the future prospects of NDTV and Pyramid Saimira. Ajith Bokadia

NDTV (Rs 86.9): NDTV was one of the most resilient stocks in the Indian markets up to August.

But the vertical plunge since then has decimated the stock and it is currently close to its all-time low at Rs 77 recorded in June 2004.

Investors who are still holding the stock can continue to do so as there is a possibility of the slide halting around Rs 77.

It would however be a steep climb for the stock as it reverses upward.

The first resistance would be at Rs 145. Fresh purchases are recommended in this counter only on a weekly close above this level. Subsequent resistance levels would be at Rs 184 and then Rs 220.

Pyramid Saimira (Rs 44.1): This is yet another stock that has been bludgeoned out of shape since the January peak. Pyramid Saimira is below its listing price and at a life-time low.

The fact that it did not participate in the November rebound in the market implies that the short-term outlook is extremely weak and there is a possibility of the stock plumbing lower levels.

Aggressive investors can sell at current levels and consider re-investing in it on a weekly close above Rs 170.

I have bought Reliance Capital at Rs 1,425. Should I hold it or sell? Saurabh Bansal

Reliance Capital (Rs 587.3): In our previous review of Reliance Capital in March this year, we had opined that a long-term base was possible in the band between Rs 900 and Rs 950.

But the stock declined 55 per cent in October as it formed the trough at Rs 508 on October 27.

The chart pattern since this trough does not inspire confidence and the stock could continue its downward trajectory to move lower to Rs 400 or even Rs 320 over the medium-term.

Investors should divest their holdings if it closes below the recent trough at Rs 500.

Short-term resistances will be at Rs 780 and then Rs 900. Key medium-term resistance zone is between Rs 1,250 and Rs 1,500.

The medium-term outlook for the stock will turn benign only on a close beyond this zone.

I am holding shares of Sterlite Technologies purchased at higher levels. Should I sell the stock and book loss or should buy at current level and do averaging? Nemin Dani

Sterlite Technologies (Rs 227.2): This stock declined below its key long-term support at Rs 427 in the last week of October to form the trough at Rs 164 on October 27. However, this stock has been in a structural up-trend since 1998 and the decline in October has halted just above the long-term trend line.

Investors can hold the stock with a stop just below the recent low.

Short-term resistances are at Rs 290 and then Rs 330.

Investors with a short investment horizon can sell the stock at either of these levels. The long-term view will however turn positive only on a weekly close above Rs 560.

— Lokeshwarri S.K.

(Readers can send in their queries, on not more than two companies, to techtrail@thehindu.co.in.

Queries can also be sent by post to: Tech Trail, 859/860 Kasturi Buildings, Anna Salai, Chennai 600002.

We would endeavour to answer as many queries as possible. However, constraints of space will limit the responses featured under this column)

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