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

Reliance Capital (Rs 431.3): In our review of this stock in July 2008, we had advised investors to hold the stock only as long as it traded above Rs 800, for a decline below this level would drag it lower to Rs 650 or Rs 570.

Reliance Capital breached these supports in the last quarter of 2008 and is currently halting around Rs 400. Next long-term support band is between Rs 300 and Rs 320.

Investors holding the stock can shift their stops to Rs 290. If this level is breached, the stock can halve again.

The near-term view for the stock is weak since it has declined below the trough formed in November 2008. Resistances for the next 12 months would be at Rs 620 and Rs 790.

The medium-term view will turn positive only on a close above the second resistance.

Please tell me the technical outlook of Punjab National Bank. Can I purchase the stock at these levels? Jagjit Singh

Punjab National Bank (Rs 409): As explained in our earlier columns, Punjab National Bank has been moving within an upward-moving trend channel since 2004. The stock hit the upper end of this channel in January 2008 and is currently hovering at the lower end.

In other words, the stock will receive strong support at Rs 400, where the lower trend-line is positioned.

Investors can hold the stock as long as it holds above Rs 360. Though this level was briefly violated in July 2008, the stock bounced strongly thereafter.

The long-term view for the stock continues to be positive as long as it holds above the key support at Rs 290.

Investors with a higher risk appetite can buy at current levels with a stop at Rs 360. Others can wait for a rally above Rs 485 before buying a stake in the company.

Please give the short term outlook on Rural Electrification Corporation (REC) bought at Rs 80 . Nagendra Iyer, Antima Aggrawal

REC (Rs 83.7): REC is in a strong intermediate-term up-trend since the trough at Rs 53 formed in November last year. This up-trend has already retraced almost half of the decline recorded in 2008. Immediate resistance for the stock is at Rs 100.

The long-term view for the stock will turn positive on a firm close above this level. However investors with a short to medium-term perspective can book partial profits on a downward reversal from this level.

Supports for the short-term are at Rs 75 and then Rs 67.

Please advise whether I can purchase Marico and Bharat Forge at current levels. Rohit Nazare

Marico (Rs 59.3): The stock’s long-term down-trend which began in January 2008 at Rs 83 came to end in November at Rs 47. It has significant long-term support in the band between Rs 47 and Rs 50.

After taking support at this band in November, Marico reversed its direction. Since then, the stock has been on an intermediate-term up-trend.

The stock is currently testing the resistance at Rs 60.The intermediate-term up trend-line of the stock is intact.

A long-term investor can buy the stock following an emphatic close above Rs 60 with a stop-loss at Rs 53. Medium-term investors can enter with stop-loss at Rs 57. Subsequent resistance is present at Rs 72 and then Rs 83.

Bharat Forge (Rs 82.9): In September 2008, the stock conclusively penetrated its key support level at Rs 220 and witnessed a sharp decline.

It also penetrated the key support level at Rs 120 in late October 2008. It finally found support at Rs 69 in January 2009 and is currently consolidating sideways.

Investors with long-term and medium-term perspective can enter at current levels with stop-loss at Rs 69 and Rs 76 respectively.

Medium-term investors can exit at around Rs 100. A decisive move above this level can take the stock Rs 120 levels. However, a penetration of the support level at Rs 69 can take the stock to Rs 53.

Can I have your views on investing now in Geodesic and Amararaja Batteries for medium to long-term? T. Shenoy

Geodesic (Rs 57.25): Geodesic has been on a long-term down-trend from its July 2007 high of Rs 276, forming lower peaks and lower troughs.

This down-trend accelerated in August 2008. This intensified selling interest caused a steep fall below the supports at Rs 160 and Rs 120.

This decline finally halted at Rs 39 in late January 2009 that was also the 52-week low. Since then, the stock has been on a short-term up-trend hitting upper circuit limits.

A decisive weekly close above the immediate resistance level of Rs 80 will be the cue for medium and long-term investors to purchase this stock.

The target for medium-term investors would be Rs 100 and the stop-loss at Rs 60. Long-term investors can hold the stock with stop-loss at Rs 39. However, if the stock fails to surpass Rs 80, there is a possibility of it re-testing its 52-week low.

Amararaja Batteries (Rs 39.80): After recording a life-time high at Rs 183 in February 2008, the stock began to decline. In November, the stock found support at around Rs 38 and bounced up. This up-move did not sustain for more than a month.

The stock resumed its long-term down-trend and it is retesting this support level currently.

The outlook is cautious for the stock as it is trading sideways between the long-term downtrend-line and the significant support of Rs 38. One should keep an eye on the stock presently.

Conclusive penetration of this support level will drag the stock to the next support level at Rs 22.

Long and medium-term investors can enter the counter on a weekly close above Rs 52. Medium-term target for the stock is Rs 70 and long-term investors can expect a rally to 90.

High volatility makes this stock unsuitable for short-term investors.

I am holding shares of Aban Offshore at an average cost of Rs 950. Please advise me on the technical outlook for this stock. Venkat R

Aban Offshore (Rs 456.00): The bull run which began in 2000 in Aban Offshore came to an end in November 2007 at Rs 5,555. From this life-time high, the stock has been trending downward incessantly.

During September 2008, the stock witnessed major sell-off and tumbled sharply. Key supports such as Rs 2,100, Rs 1,040 and Rs 600 levels failed to arrest the stock’s decline.

However, most recently Aban offshore found support at Rs 415 that was also the 52-week low.

Since then, the stock has been on a short-term up-move. We observe prolonged positive divergence in the weekly relative strength index (RSI) indicator and also a positive divergence in the daily RSI.

This could be a trigger for a medium-term trend reversal.

Medium and long-term investors can hold the stock with stop-loss at Rs 415. The immediate resistance at Rs 600 level could be an exit level for medium-term investors.

Long-term investors can exit at around Rs 820 which is the subsequent resistance level.

Lokeshwarri S.K.

Yoganand D

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