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

Once the lower boundary of this range was penetrated this March, it has been a vertical drop for the stock. It appears to be heading towards the long-term base below Rs 10.

The stock may move in a very wide band between Rs 8 and Rs 150 over the long-term.

It appears to have a strong long-term resistance at Rs 150 since it also formed a peak at Rs 150 in December 1994. And since it is reversing lower from the upper boundary, a return to the lower boundary is possible.

The short-term trend is also down and the downward move in the stock can continue to pull the stock lower to Rs 15.

If this level is breached, the next halt would be at Rs 7. Resistances over the next year would be at Rs 50 and then Rs 72.

Investors holding the stock can switch from this stock at current levels since it has not bottomed out yet.

Please give the prospect of Ashok Leyland. John Paul

Ashok Leyland (Rs 13.8): The multi-year structural up-trend in Ashok Leyland, which was in motion since October 2000, ended this June with the penetration of the neck-line of a triple-top pattern on the monthly chart.

This pattern took more than two years to form and made the stock oscillate between Rs 30 and Rs 55.

The lower boundary of this range was breached emphatically in September and the stock is in a free-fall since then.

There is no reversal in the chart yet and it could continue to decline in the short and medium-term.

Next support on the chart is the 2002 trough at Rs 8. Resistances over the next year would be at Rs 20 and Rs 26.

The long-term view will turn positive only on a weekly close above Rs 30.

I have purchased of Media Video and FDC at the price of Rs 64 and Rs 48. Please advise the outlook of these shares. Sailesh Sahu

Media Video (Rs 11.9): This stock was moving in an upward-moving trend channel from October 2001.

The lower boundary of this channel was breached in September 2008, signalling the end of the long-term up-trend in the stock.

The stock has been declining sharply since then and appears to be returning to the long-term base between Rs 5 and Rs 10.

It could take more than two years for Media Video to re-attain your cost price. It would be advisable to switch to some other stock with better prospect of gaining rapidly once the market reverses.

FDC (Rs 27.9): FDC has weathered the current market down trend relatively well and is currently hovering just below its key long-term support at Rs 28.

The stock could continue to move in the range between Rs 22 and Rs 38 for a few more months as it builds a platform from where to reverse higher. Investors can hold the stock with a stop at Rs 20.

If it holds above this support, a move higher to Rs 38 or Rs 50 is possible over the next month.

However, if the support at Rs 20 is penetrated, the stock could decline to Rs 12. Investors should divest their holding on a close below Rs 20.

I am holding JP Associates bought at Rs 370 and GTL Infra purchased at Rs 106. Please advise whether I should hold these shares or sell them. Ravi Kumar, Krishnamurthy

Jaiprakash Associates (Rs 66.3): In our previous review of this stock in February this year, we had mentioned that the long-term outlook for the stock would be damaged only on a firm close below Rs 200.

We had however been hopeful of a reversal above this level.

JP Associates moved contrary to our expectation and declined below the Rs 200-support in June and went on to form a trough at Rs 47 in late October.

If we consider the monthly chart, the stock has been in a structural up-trend since 1999. The long-term trend-line since this trough has not been penetrated yet.

This line is currently poised at Rs 43 and the subsequent long-term support is at Rs 34. Since this is one of the trading favourites on our bourses, the chances of a sharp rebound once a pull-back rally starts are quite high.

Secondly, the stock appears to be currently stabilizing in the band between Rs 50 and Rs 100.

You can continue to hold the stock as long as it remains above Rs 34. There could be sharp rallies over the next year that can take it higher to Rs 140 or Rs 200.

Weekly close above Rs 200 is however needed to make the intermediate term view positive in this stock.

GTL Infrastructure (Rs 36.9): GTL Infrastructure is attempting to pull itself higher from the October 27 trough at Rs 30.

There is strong long-term support at Rs 30 on the charts and investors can hold the stock as long as this level holds.

The stock is currently facing a hurdle in the form of the 200-day moving average positioned at Rs 44. Once this level is surpassed, there can be a rally to Rs 60.

The medium-term outlook will turn positive only on a strong close beyond this level. Those holding the stock, purchased at higher levels, should switch out in rallies at the levels indicated above.

I have bought Axis Bank at an average price of Rs 620. May I know the prospects of this scrip? BGR Mandava

Axis Bank (Rs 443.1): The structural bull-market in Axis Bank that has been on since its listing in 1999, ended this year and the stock is currently attempting to stabilize itself around the support at Rs 400.

The stock moved in the range between Rs 320 and Rs 420 between January and May 2006 and this range is expected to support the stock in the immediate future. The long-term trend-line positioned at Rs 300 is the next support that investors can watch out for.

Investors with a long-term perspective can however hold the stock as long as it holds above Rs 220.

A mild reversal is currently in progress since the November 26 trough at Rs 362. Strong medium-term resistances would be encountered at Rs 575 and then Rs 720. Investors can divest part of their holdings if the stock reverses from either of these levels.

I have invested in Greaves Cotton at Rs 400. Can I average now? M. Ananda

Greaves Cotton (Rs 66.2): Greaves Cotton declined below the key long-term support at Rs 179 in September and the fall has accelerated sharply since then.

The stock has not formed a sustainable bottom yet and appears on course to decline further. It is therefore not a good idea to start averaging at this place.

You can instead wait for the stock to rally beyond Rs 177 before adding to your holding.

The next long-term support-band is between Rs 40 and Rs 55.

The stock should be divested if the floor of this range is penetrated.

— Lokeshwarri S.K.

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