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

Cairn India (Rs 167.70): In our previous review of Cairn India last September, we had expected the stock to recover from the long-term support-band between Rs 180 and Rs 200.

We had also advised investors to divest their holdings on a weekly close below Rs 180.

Cairn India declined below Rs 180 in the second week of October 2008 to bottom at Rs 88 on October 27, that year. A strong recovery is currently in progress.

But the stock has already reached the first medium-term target at Rs 185. The 200-day moving average at Rs 200 will also act as a strong resistance.

The stock would now need to clear the resistance band between Rs 180 and Rs 200 strongly to signal a move towards Rs 215 or Rs 250 over the next year.

But failure to clear this zone would imply an impending decline towards Rs 150 or Rs 126. It is however likely that a long-term trough has been formed at Rs 88 and the next trough could be at a higher level.

Investors can use declines to buy the stock with a stop at Rs 85.

Patel Engineering (Rs 165.80): Patel Engineering too has plunged below the key support at Rs 300 in the last quarter of 2008 and is currently attempting to recover from the long-term support-band between Rs 100 and Rs 110.

This rally can extend to Rs 250 or Rs 300 over the next six months.

Investors can hold the stock with a stop at Rs 100 and divest their holdings at either of the levels mentioned above.

Key medium-term resistance will be in the zone around Rs 300.

A move beyond this level is needed to signal that the stock is on a road to long-term recovery.

What does the technical chart of Kalindee Rail Nirman show? I had bought these shares at Rs 140. Ramit

Kalindee Rail Nirman (Rs 140): The structural up-trend from the 2003 trough ended in January 2008 in Kalindee Rail Nirman.

The stock has shattered all its long-term supports since then and it finally bottomed at Rs 95 in October 2008. A very strong up-trend is currently in progress.

Though the stock can decline to Rs 117 in the near term, it has the potential to rebound to Rs 180 or Rs 210 again. Short-term investors can hold the stock with a stop at Rs 115.

Investors with a longer term horizon can hold with a stop below its October trough at Rs 90. A move to Rs 300 is possible over the next year.

What is the prospect of GMR Infrastructure? Should I hold or sell the shares at current market rate. Rabish Kumar Singh, Ramesh Babu, Kishor Agrawal, Suresh Kumar Yadav

GMR Infrastructure (Rs 66.50): GMR Infrastructure has formed a double-bottom that is a bullish reversal pattern around Rs 50.

But the stock is currently moving sideways in a broad range between Rs 50 and Rs 90.

A firm break-out above Rs 112, that is the previous medium-term peak as well as the long-term moving average, will be the first indication that the medium-term outlook is turning positive.

Else, the stock can continue to move in the band between Rs 50 and Rs 90 for a few more months. Short and medium-term investors can book partial profits at current levels and hold the rest of their holding with a stop at Rs 62.

Long-term investors can hold the stock with a stop at Rs 45. The upward ceiling over the next two years would be Rs 132.

Is it safe to buy IFCI now from a long-term perspective? Sanjeev Babu

IFCI (Rs 21.25): IFCI formed a double bottom in October and November 2008 and is currently moving in a range between Rs 15 and Rs 25.

Near-term resistances for the stock are at Rs 25 and Rs 30. The medium-term outlook will turn positive only on a firm weekly close above Rs 30. Subsequent target is Rs 40.

Since the stock is reversing lower from the upper boundary of this trading range, it can retreat to Rs 20 or even Rs 15.

The stock can be bought with a purely trading perspective on declines with a stop at Rs 14. The long-term trend-line that is also positioned at Rs 15 should prevent a sharp slide from those levels.

Please give the upper and lower targets of TV 18. Kishor Agrawal

TV18 (Rs 84.80): This stock made a low at Rs 53 on November 20, 2008 and more than doubled in price in the rally that ensued.

Though a sharp pull-back is on since January 6, the short-term trend in the stock continues to be up.

This trend will turn negative only on a decline below Rs 76. Short-term investors can hold the stock with a stop at Rs 72.

Investors with a longer horizon can hold the stock as long as it holds above Rs 50 on a weekly basis.

Medium-term resistances are at Rs 130 and Rs 176. A sideways move between Rs 60 and Rs 130 is possible for a few more months before it breaks-out higher.

Please let me know the prospects of Aftek bought at Rs.30. Jeet Chadha

Aftek (Rs 11.53): This stock has been in a structural down-trend since September 2005. The third leg of this move that began in January 2008 pulled it to Rs 11 by November 2008.

Aftek has long-term support between Rs 10 and Rs 11 where the stock formed a trough in 2001.

Investors still holding the stock can continue to do so as long as it holds above Rs 10. There can be rallies to Rs 18 or Rs 25 over the next two years where they can exit the stock.

Please let me know the technical view on Moser Baer purchased at Rs 156. Anand Sharma

Moser Baer (Rs 63): Moser Baer penetrated the key long-term support at Rs 130 in June 2008 to finally halt at Rs 50 in November.

There is a strong support between Rs 45 and Rs 50 where the stock formed a significant trough in November 2002. The recovery from the recent trough is however quite tenuous and a decline to Rs 59 or Rs 50 is possible in the short-term. Investors can hold the stock with a stop at Rs 50.

It is imperative to sell the stock on a decline below Rs 50 since the next support on the long-term charts is at Rs 25. Short-term resistance for the stock is at Rs 90 while the key medium term resistance is at Rs 110.

I hold shares of Reliance Power. Please give the 6-month view for this stock. Suresh Kumar Yadav

Reliance Power (Rs 106.90):

Reliance Power has been quite stable over the last two months.

Key short-term support for the stock is at Rs 100. Investors with a six-month perspective can sell the share on a decline below this level since the next target for the stock would be its all-time low at Rs 82.

If the stock holds above this level, it can rally higher to Rs 146 is possible over the next six months. Decline below Rs 100 will imply a sideways move between Rs 60 and Rs 120 over this period.

— Lokeshwarri S.K.

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