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

Swaraj Engines (Rs 106.1): The broad-based sell-off in October dragged Swaraj Engines below its key support-level at Rs 174 and the stock is now nearing the psychological support at Rs 100. The next support band for the stock is between Rs 90 and Rs 100.

Hold the stock as long as it trades above Rs 90. Next long-term support for this stock is at Rs 70.

The medium-term outlook for this stock is however negative. It needs to close above Rs 210 in order to mitigate the bearish outlook.

Short-term resistances would be at Rs 150 and then Rs 170. Investors can offload part of their holdings if the stock struggles to move past these levels.

I have purchased shares of Aditya Birla Nuvo at Rs 2,300. Kindly give the technical outlook of this stock. R M Kumarappan

Aditya Birla Nuvo (Rs 481.5): Aditya Birla Nuvo tried to hold above the key support level at Rs 1,000 up to the second week of October. But thereafter, it was a sharp dive downwards as the stock price halved from its early-October levels.

Immediate support for the stock is in the zone between Rs 370 and Rs 400. If this zone is breached, the stock can decline to Rs 270.

Key medium-term resistance for the stock is at Rs 1,000. Fresh purchases are recommended only on a firm close above this level.

Near-term resistances would be at Rs 660 and Rs 800. Short term investors can divest part of their holding on a failure to move beyond this level.

Give me the technical prospects of Essar Shipping. Neville Mistry

Essar Shipping (Rs 27): Essar Shipping recorded a spectacular rally between November 2007 and January 2008 as the stock surged from Rs 39 to Rs 250.

This move has been completely retraced and the stock is currently at 2006 levels. A range-bound move between Rs 20 and Rs 50 was witnessed for an extended period between September 2004 and November 2007.

The stock is now back to this long-term base. Short-term support would be available at Rs 20 and below that at Rs 13.

The medium and short-term outlook for the stock are however negative and the chart patterns suggest that it has not bottomed out yet. Short-term resistances would be at Rs 50 and Rs 65. Investors should divest their holdings in rallies.

I have purchased Chennai Petroleum Corporation at Rs.300. Please give your short and long term view on this stock. Subur Basha Sheikh, C Renganathan

Chennai Petroleum Corporation (Rs 105.4): This stock moved below the support at Rs 142 in November and is currently attempting to stabilize itself in the long-term support band between Rs 100 and Rs 120. The near term view for the stock is negative since there is no sign of a reversal on the charts yet. If the support at Rs 100 is penetrated, the next halt could be at Rs 72.

Investors with a medium to short-term perspective can exit their holdings at current levels and re-purchase the stock once it records a strong close above Rs 150.

Short-term resistances for Chennai Petroleum would be at Rs 145 and then Rs 178. The key medium-term resistance is at Rs 200. A weekly close above Rs 200 is needed to signal that the stock is on the way to recovery.

The long-term view is quite bleak for this stock. Since it is already below key support levels, it is hard to identify where it can finally bottom. Rallies would face difficulty in getting past Rs 200 over the next 12 months.

What does the chart of GMR Infrastructure suggest? Has it bottomed yet? Amit Shanker

GMR Infrastructure (Rs 53.2): In our review of this stock in March, we had advised investors to exit it on a decline below Rs 125. We had also mentioned that the next support for GMR was at Rs 88. The stock is well below both these levels and it formed a trough at Rs 45 on October 27. The rally from this trough could not sustain and the stock is currently hovering between Rs 50 and Rs 60.

It is too early to judge if the stock has bottomed out at Rs 45. A sideways move between Rs 40 and Rs 80 can ensue for a few months before it forms a lasting trough. Investors who wish to purchase this stock can do so, on a weekly close above Rs 115. Such a move will pave the way for an ascent to Rs 158 or Rs 180 over the next one year.

I have purchased Moser Baer at Rs 300. Should I book loss or buy additional shares to average? P L Seethai

Moser Baer (Rs 54.8): In our review of Moser Baer in March this year, we had indicated that the stop loss for the stock ought to be at Rs 140. This level was penetrated in June and it is currently drawing close to its 2002 trough at Rs 45. You can hold the stock as long as it holds above Rs 45. If this level is penetrated, a decline to Rs 17 is possible.

An alternative strategy would be to sell the stock at current levels and re-invest once it records an emphatic close above Rs 150. Buying additional shares at this juncture is not advisable.

Please advise me on the long-term technical outlook for UTV Software and Communications and Everonn Systems. Ajith Bokadia

UTV Software and Communications (Rs 208.3): This stock withstood the bear onslaught quite well up to the second week of October. UTV Software appeared to be charting a shallow correction between Rs 700 and Rs 1,050 until then.

But once the floor at Rs 700 was shattered, there has been a vertical plunge to the recent trough at Rs 239. Immediate support for the stock is around Rs 240.

But weakness in the medium-term chart suggests that a decline to the next support zone between Rs 160 and Rs 180 is possible.

It would take the stock a couple of years to recover from the severe erosion in price witnessed over the last two months.

Rallies are likely to get capped at Rs 450 or Rs 500. Those who purchased the stock above Rs 800 should exit the stock in rallies.

Everonn Systems (Rs 247.3): Everonn Systems too has been battered and bruised since this January as the stock plummeted to its life-time low at Rs 123.

But the recovery since this trough has been very strong and what is more, the stock has managed to hold on to these gains.

Key short-term support would be at Rs 190 and short-term investors can buy the shock with a stop at Rs 185. Investors with a long-term perspective can buy with a deeper stop at Rs 120.

Key medium term resistance would be at Rs 550. This could act as a ceiling for any rally over the next one year.

What is the long-term prospect of ITI? Is it advisable to hold to this stock? Debraj Sengupta

ITI (Rs 14.4): This stock recorded a peak at Rs 275 in January 1994. But it has been a down-hill ride for the stock ever since. It has been moving in a range between Rs 7 and Rs 90 since 1995.

The worrying factor is that it takes a frenzied last phase of a bull-market to take the stock towards the upper boundary of this range.

The correction in 2008 has pulled it almost towards the long-term base at Rs 7. It would take more than two years for the stock to rise to Rs 90 again.

Investors should divest their holdings in rallies to Rs 31 or Rs 45.

— Lokeshwarri S.K.

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