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

Satyam Computers (Rs 177.2): Satyam Computers formed a rounding top formation that is a top-reversal pattern, from the beginning of 2007 to June 2008.

This pattern was confirmed when the stock moved emphatically below the long-term trend-line in July 2008. However it was much later, in December 2008 that the key long-term support at Rs 200 was penetrated.

The stock is currently ruling firmly below this level. A monthly close above Rs 200 is the first requisite to signal that a long-term recovery has begun in Satyam.

The recent trough at Rs 115 should prove to be a good long-term support. If this level is breached, next support will be in the zone between Rs 55 and Rs 70.

A recovery is currently underway. But the stock will face stiff medium-term resistance in the zone between Rs 200 and Rs 214. This is the area where the stock formed the downward gap on December 17. Short and medium-term investors who have bought the stock at recent lows can book partial profit in this area. Next resistance would be at Rs 250.

Kindly give me the technical outlook of Voltas on short and long-term basis. R M Kumarappan

Voltas (Rs 62): The last time we had visited Voltas was in May 2008 when the long-term outlook was still positive.

It then appeared that Rs 100 would act as a long-term support and a range bound move between Rs 150 and Rs 270 seemed likely over the medium-term.

But the broad-based sell-off in October 2008 dragged the stock below Rs 100 to finally bottom at Rs 43 on December 2.

A fledgling rally is currently underway from this trough but the stock would need to move beyond Rs 90 to signal that a medium-term recovery is underway.

Short-term investors can book profit on rallies to Rs 72 or Rs 90. Long-term investors can continue to hold the stock. Rally to Rs 100 or Rs 126 is possible over the next two years.

I have purchased Ganesh Housing Corporation at Rs 785 and HDIL at Rs 761. What are the nine-month prospects of these stocks? Tushar Kanti Ghosh

Ganesh Housing Corporation (Rs 56.7): This stock has given up all the gains recorded since early 2006 and a move beyond Rs 400 is extremely difficult over the next two years.

The sideways move between Rs 50 and Rs 70 witnessed since October lacks strength and a decline to the next support at Rs 34 or Rs 28 is possible over the next nine months.

The resistance at Rs 70 will act as a strong barrier for any rally. If this level is surpassed, a move to Rs 123 becomes possible. Upper limit for the next one year is Rs 200.

Housing Development and Infrastructure (Rs 143.1): This stock made a life-time low at Rs 69 on December 2 and its stars have been on an ascendant ever since.

It gained over 160 per cent from this trough when it recorded the recent peak at Rs 179. HDIL has a high correlation with the BSE Sensex which means that the stock will remain volatile as long as the market stays choppy.

It is however likely that a long-term trough has been formed at Rs 69 and the stock can form a higher bottom in its next decline. Key medium-term support is Rs 111 and medium to short-term investors can buy the stock in declines with a stop at Rs 100.

Long-term investors can however hold with a stop below its December trough at Rs 60. A rally up to Rs 300 is possible over the next nine months, provided it holds above Rs 100.

Decline below Rs 100 will result in the stock oscillating in a band between Rs 60 and Rs 200 over the next year.

Kindly let me know if I can purchase Tata Power and Sun Pharma at current market price or wait for further reduction in stock price. I can hold them for two to three years. S Jegadeesan

Tata Power (Rs 770.9): In our review of Tata Power in October last year we had mentioned that the long-term outlook for the stock would stay positive as long as it traded above Rs 660.

Though the stock declined below Rs 600 on October 27, 2008, it has traded above this level for the rest of the year. It has been moving in a range between Rs 600 and Rs 800 since November in an attempt to stabilize itself around the key long-term support at Rs 660.

The long-term view will turn overtly negative only on an emphatic monthly close below Rs 600.

Investors with a long-term perspective can buy close to Rs 650 with a stop at Rs 500. A move to Rs 1,000 is possible over the next two years..

Sun Pharmaceuticals (Rs 1,048.7): Sun Pharmaceutical has been relatively resilient in the market decline so far. The stock has retraced only 38.2 per cent of the rally from the 2003 trough.

It has strong support around Rs 1,000 and is currently attempting to stabilize itself around this zone.

Investors with a higher risk appetite can buy at current levels with a stop below the recent trough at Rs 970. Next long-term support band for the stock is between Rs 840 and Rs 900.

However the medium-term view will turn positive only on a weekly close above Rs 1,200.

Less aggressive investors can wait for a move beyond Rs 1,200 before investing in this stock. Rally beyond Rs 1,200 will take the stock higher to Rs 1,350.

I request your outlook on BL Kashyap and Golden Tobacco . Chandru

BL Kashyap (Rs 263.8): Our previous review of this stock was in July 2008 when it was moving sideways around the long-term support at Rs 980.

We had then been positive on the outlook for the stock and expected a recovery from those levels. We had however marked the stop loss for long-term investors at Rs 820.

BL Kashyap crashed below this long-term support as well as its previous life-time low at Rs 374 in the carnage that ensued in October and November. It need not be added that the long-term trend has turned down after this fall.

A tentative recovery is on from the November trough at Rs 185. Medium-term investors can buy the stock as long as it holds above Rs 220. The up-trend is likely to continue to take the stock to Rs 346 or Rs 386 over the next three months.

Key medium term resistance will be at Rs 530. Long-term investors can buy if the stock holds the Rs 185-trough for another month.

Golden Tobacco (Rs 68.9): In our previous review of Golden Tobacco in July 2008, we had recommended a switch when the stock was trading at Rs 133. We had also expected a decline to Rs 107 over the ensuing six months. The stock out-did our forecast by declining to Rs 40 by December 2.

The company has a long-chequered history. It rose to the dizzying height of Rs 188 in 1992 only to go in to a sharp slide thereafter. It moved below Rs 30 for almost eight years from 1996. The speculative excesses of the last bull market can be clearly gauged from the sharp spiral to Rs 750 in the last quarter of 2007 and the equally dramatic decline in 2008.

There has been a mild recovery from the recent trough at Rs 40 that can take the stock to Rs 100 or Rs 144 over the next twelve months. Investors holding this stock should divest their holdings in such rallies. A monthly close above Rs 150 is required to bring the speculative fervour back on this counter.

— Lokeshwarri S.K.

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