Long-term outlook positive for Lupin

| Updated on January 03, 2011 Published on January 03, 2011









I have purchased JK Paper at Rs 70 and Fortis Healthcare at Rs 150. Please advise on the prospects of both the stocks. Atul Kedia

JK Paper (Rs 56): This stock faces strong long-term resistance around Rs 75. The stock reversed lower from this level repeatedly in December 2003 and again in December 2005. The rally that began from the March 2009 depths reached this resistance in October and the stock is on a slippery slope since then. Since you have purchased the stock close to this peak, we recommend a stop at Rs 52. If the stock reverses higher from here, it can consolidate in the range between Rs 52 and Rs 75 for few more months before attempting to move beyond Rs 75.

Conversely, a decline below Rs 52 can drag the stock lower to Rs 44 or Rs 37 over the next three to six months.

Fortis Healthcare (Rs 146.6): The uptrend from October 2008 trough in Fortis Healthcare appears to have terminated at the March peak of Rs 187 and the stock is in a consolidation phase since then. That this correction halted above the key medium-term support at Rs 132 is a positive for the long-term prospects. Continued movement in the broad trading band between Rs 130 and Rs 190 can be followed by a fresh leg of the uptrend that can take the stock higher to Rs 230 over the next 12 months.

But investors ought to exit the stock on a decline below Rs 130, since that would imply an impending decline to Rs 116 or Rs 100 over the medium-term.

Please highlight the short- and long-term prospects of Sesa Goa and Ess Dee Aluminium. Altaf Hussain

Sesa Goa (Rs 328.4): In our review of this stock in August 2010, we had written that one leg-of the uptrend from January 2009 was completed at the peak of Rs 494 formed in April. We had advised investors to hold the stock with stop at Rs 300 and had given the subsequent supports at Rs 274 and Rs 225.

Sesa Goa declined slightly below the support at Rs 300 in December but the stock is receiving support in the zone between Rs 290 and Rs 300. Medium-term supports for the stock stay at Rs 274 and Rs 225. Long-term investors can hold the stock as long as it trades above the second support.

Short-term resistances would be at Rs 347 and Rs 383 while long-term resistance for the stock is at the previous peak at Rs 494. Target on a break above Rs 494 is Rs 560 and Rs 730.

Ess Dee Aluminium (Rs 457): Long-term trend in Ess Dee Aluminium is down since January 2008 peak of Rs 843. The recovery in 2009 took the stock higher to Rs 535 that occurs near the 61.8 per cent retracement of the previous decline.

The stock is in a gentle corrective phase since June 2010. This decline can take the stock price lower to Rs 400 or Rs 368 over the next three to six months. Investors can therefore hold the stock with stop at Rs 360.

If the stock continues to hold above Rs 450, it would be a bullish indication and can imply that the stock can move higher to Rs 700 or Rs 750 over the next 12 months. Supports below Rs 368 are at Rs 272.

I hold shares of Engineers India. What are the long-term prospects of this stock? Aashutosh Arun

Engineers India (Rs 333.3): Engineers (I) is in a sharp correction since the May 2010 peak of Rs 538. This correction is halting at the medium-term support at Rs 312 and it is moving in a sideways range between Rs 310 and Rs 370 since last June. Since this sideways range follows a steep decline, it could be a halt before the stock resumes its downward move. Investors wishing to buy the stock should therefore wait for a move above Rs 450 before making fresh investments in it.

Inability to move above Rs 400 would mean that the stock could decline sharply to Rs 280 or Rs 225 over the next 12 months. The long-term prospects for the stock would however be marred only if the stock goes on to record a weekly close below Rs 225.

What is the outlook for Lupin? C. Dayakar

Lupin (Rs 480.4): Lupin was in a long-drawn consolidation phase between Rs 100 and Rs 150 between November 2006 and May 2009. The stock has not looked back since it broke out of the upper end of this trading band till it attained the recent peak of Rs 519.8 on November 30. Long-term outlook for the stock is very positive. It has key supports at Rs 396 and then at Rs 360. If the stock consolidates above these supports, it can move on to a new high over the long-term. Long-term investors can therefore hold the stock with the stop at Rs 350.

Short-term support for the stock is at Rs 422. Reversal from this level will take the stock up to Rs 520 or Rs 592 in the upcoming months.

I have shares of Gujarat Sidhee Cement purchased at Rs 24. Please advise what I should do with this. Jacob Thomas

Gujarat Sidhee Cement (Rs 12.9): This stock continues to be in the bear's grip. Failure to clear the resistance at Rs 21 in 2009 denotes that the stock could move in a range between Rs 6 and Rs 21 in the foreseeable future. Long-term trend will turn positive only on a close above this level.

The stock is currently testing the key medium-term support at Rs 12. Investors should divest their holding on a close below this level since subsequent targets for the stock are Rs 10 and Rs 6.

If the stock reverses higher above the support at Rs 12, it can rise to Rs 15.2 or Rs 17.5 where investors can consider exiting.

Please discuss the prospects of Jindal Poly Films. Venkatesh

Jindal Poly Films (Rs 527.4): Jindal Polyfilms was moving sedately upwards with a slightly positive tilt up to July 2010. The announcement of bonus in August took the price soaring higher to the record high of Rs 700 (price adjusted for bonus) by October. The correction that ensued from October has pulled the stock price down to the key medium-term support at Rs 390. Investors can continue to hold it as long as the stock trades above Rs 375. Decline below this level will however cause a decline to the long-term support zone between Rs 120 and Rs 220.

Short-term resistance for the stock is at Rs 580. Investors with short- and medium-term perspective can divest their holdings on a failure to cross this level. Next resistance is at Rs 700.

Please let me know the long-term prospects of KS Oils bought at Rs 30. Parrivel

KS Oils (Rs 47.4): The structural uptrend from 2003 low in KS Oil halted in January 2008 and the stock is in a protracted consolidation phase since then. Long-term support for the stock is at Rs 43. The stock tested this support in November 2008 before bouncing higher to Rs 73. It has however lost ground since then and is once more hovering around this support. Long-term investors can use Rs 38 as a stop-loss. Weekly close below this level should be the cue for them to divest their holdings in this stock as that can precede a decline to sub-Rs 10 levels.

Key medium-term resistance zone for the stock is in the zone between Rs 65 and Rs 75. Breach of this level can take the stock higher to Rs 84. Long-term view will turn positive only on a close above this level.

— Lokeshwarri S.K.

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Published on January 03, 2011
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