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

I am holding shares of Axis Bank purchased at Rs 1,040 and Om Metals and Infra bought at Rs 38. Where are the short and medium term supports and resistances for these stocks? Hemant Jain

Axis Bank (Rs 762.7): In our previous review of Axis Bank in February this year we had indicated that the long-term investors can hold the stock as long as it traded above Rs 220 and it could move to Rs 575 or Rs 630 over the next 12 months. However, the post-election outburst made the stock move above these long-term targets to Rs 849 on May 19. Next intermediate term target for the stock is between Rs 900 and Rs 970. It is hard to envisage a move above this zone just yet. If it does, then it would move towards its all-time high peak of Rs 1,291.

Key short-term support for the stock is at Rs 690 and medium term supports are at Rs 620 and Rs 490. Investors with a short-term perspective can book some profit at current levels and hold the rest with a stop at Rs 690.

Om Metals and Infra (Rs 18.5): This stock has moved past Rs 16 where the 200-day moving average is positioned. It can now head towards the medium term resistances at Rs 23 and Rs 34. Long-term outlook will turn positive only on a close above Rs 34. Supports would be available at Rs 10 and Rs 9. Investors can divest part of their holding in this rally and consider re-investing on a close above Rs 34.

At what price can I buy Gujarat NRE Coke, HCC and GSPL, what are the stop loss levels and the targets? Shaher Bano

Gujarat NRE Coke (Rs 39.2): Last time we visited this stock in early March, we had said that the long-term support at Rs 20 should stem any declines though Gujarat NRE Coke can fluctuate in a range between Rs 20 and Rs 36 for a few more months. Our break-out targets for this stock were Rs 43 and Rs 56. The stock moved beyond the upper boundary of this range to achieve the first target this week. However, the stock’s movement has turned hesitant ever since it moved close to this target. A firm close above Rs 43 is needed to take it towards Rs 56 or Rs 60. The ceiling for the next 12 months is likely to be at Rs 60. The stock is in a short-term correction now and investors should wait for a close above Rs 43 or a decline to Rs 32 before buying this stock. Medium-term investors can hold with a stop at Rs 24 while stop for short-term investors can be at Rs 32.

Hindustan Construction Company (Rs 101.8): HCC has been among the stellar performers this week with 67 per cent gain. The stock had been struggling to move beyond the resistance band between Rs 60 and Rs 70 ever since it formed a long-term trough at Rs 30 in October 2008. The break-out this week is making the stock head towards the next medium-term target between Rs 110 and Rs 120. Investors with a lower risk-appetite can wait for a weekly close above Rs 120 before buying this stock since that would imply an impending move to Rs 150 or Rs 175. Those with a greater risk appetite can buy in declines with a stop at Rs 87. It would however do to remember that the zone between Rs 110 and Rs 120 is a key resistance for the year and a downward reversal from there can lead to a decline to Rs 60 again.

GSPL (Rs 57.7): This stock formed a double bottom at Rs 26 in December 2008 and January 2009 and has been in a strong medium term uptrend since then. GSPL broke out of the upward channel that framed this uptrend the last week to record a peak at Rs 66. However, the sell-off witnessed last Tuesday implies that the stock will not find it easy to move beyond the resistance zone between Rs 67 and Rs 70 just yet. If it does, the next medium term target is at Rs 80.

Investors with a high risk-appetite can buy at current levels with a stop at Rs 48. Fresh purchases are not advised on a close below Rs 48. Long-term investors can hold the stock as long as it trades above Rs 40.

I am holding Ranbaxy purchased at Rs 250. What is the short to medium term outlook for this stock? R.P.S. Thakur

Ranbaxy Laboratories (Rs 220.9): Ranbaxy retraced almost the entire structural bull market from the 2001 trough when it bottomed at Rs 133 this March. Though the uptrend from this trough was choppy, the stock has more than doubled its price since then.

The morning star candlestick pattern on the monthly chart too implies that a long-term trough could have been formed in March and long-term investors can hold the stock as long as it trades above Rs 120.

Though the stock can rally to Rs 257 or Rs 270 over the medium-term, the presence of the 200-day moving average in this zone makes it a formidable resistance. Short and medium-term investors can therefore book some profits around these levels. If this level is surpassed, the stock could rise to Rs 310 over the next 12 months. Short-term investors can hold as long as the stock trades above Rs 200 while stop-loss level for medium term investors can be at Rs 160.

Kindly give me long-term advice on Glenmark Pharma purchased at Rs 350. R.M. Kumarappan

Glenmark Pharma (Rs 221.6): In our review of Glenmark Pharma on March 1, this year, we had given a 12 month target of Rs 200 or Rs 250. The long-term stop loss was given at Rs 110 then and subsequent targets at Rs 85 and Rs 50.

The stock has managed to hold above this long-tem support and recorded a peak of Rs 227 on May 19. Long-term investors can continue to hold the stock as long as it trades above Rs 110.

But there would be numerous hurdles to any up-move. The first hurdle would be in the band between Rs 200 and Rs 250 as mentioned above. Once this zone is surpassed, the stock can rally to Rs 265. The target for the next two years is Rs 350.

What are the medium and long-term prospects for CESC? Kevin

CESC (Rs 353.3): CESC spent the period between October 2008 and April 2009 moving in a range between Rs 160 and Rs 270, which can be termed a long-term base building effort by the stock. The sharp surge witnessed last week helped it shatter the upper boundary of this range and made it move towards the long-term term resistance at Rs 370.

Investors ought to tread carefully at these levels since a reversal from here can drag the stock lower to Rs 250.

Conversely, move above Rs 370 will take the stock to the next long-term targets at Rs 440 or even Rs 510.

Fresh purchases are therefore recommended on a close above Rs 370. Investors holding the stock can do so with a stop at Rs 240.

— Lokeshwarri S.K.

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