Portfolio

QUERY CORNER: Tata Communications on a medium-term downtrend

| Updated on August 03, 2013 Published on August 03, 2013

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I have the shares of PTC and NMDC. Please let me know the technicals.

Amol Chavan

PTC India (Rs 39.9): PTC is currently positioned at around the long-term support at Rs 38, where it formed a base between 2004 and 2006. The bottom in 2008 was also formed around this level. If this level is breached decisively, next long-term support for the stock would be at Rs 28.

Investors can hold the stock as long as it trades above Rs 38. It would, however, be prudent to exit the stock if this level is breached since the next support is placed some way off, at Rs 28.

Medium-term resistance for the stock would be at Rs 58 and Rs 67. Key long-term hurdle is placed at Rs 80. Inability to move beyond this level will result in the stock vacillating in the zone between Rs 40 and Rs 80 for a few more months.

NMDC (Rs 97): NMDC too has moved below its critical long-term trough at Rs 115, that was formed in November 2008. Investors ought to have exited the stock once this level was breached. Next support for the stock is at the 2007 trough formed at Rs 66.

You can consider selling the stock at this point and re-entering if it manages a close above Rs 136. It is not advisable to buy more of the stock at these levels. If it manages to move higher, the stock will find resistance at Rs 138 and Rs 161 over the medium-term.

NMDC has a long way to go before the long-term prospects turn positive. Key long-term resistance for the stock is at Rs 278.

I bought shares of Tata Communications at Rs 524 in June 2009 and Bank of Baroda at Rs 881 in January 2013. Can I buy these stocks again for averaging at these levels?

Savitha Prabhu

Tata Communications (Rs 143.4): This is not the right level to purchase Tata Communications. The stock has breached its key long-term support at Rs 178 and is sliding lower fast. Medium-term trend is down. Next support for the stock is in the band between Rs 115 and Rs 130.

You can consider averaging if the stock manages to reverse from this support band. But if this level is breached, the stock could slide to sub-Rs 100 level.

Key medium-term hurdle for the stock is at Rs 180. Risk-averse investors can wait for a strong close above this level before buying the stock. Next targets are Rs 215 and Rs 260. The zone between Rs 250 and Rs 270 needs to be surpassed to signal that the long-term view is turning positive. Inability to do so will keep the stock’s outlook under a cloud.

Bank of Baroda (Rs 487.7): This stock has breached its important long-term support at Rs 515 .

This level occurs at the 61.8 per cent retracement of the rally from the 2009 low.

That said, the risk of buying at this juncture stems from the fact that there is no reversal on the charts yet. Next halt would be around Rs 437 or even lower at Rs 370.

Reversal from these levels can make the stock rally to Rs 660 or Rs 840 over the medium-term. Long-term trend in the stock will turn conducive only on a firm close above Rs 900.

Could you please let me know the technicals of Easun Reyrolle and Dhanlaxmi Bank?

Maven

Easun Reyrolle (Rs 40.3): The prospect of this stock is not too alluring. Trends along all time-frames — long, medium as well as short — are currently down. Next long-term support is present at Rs 31 and the stock could be heading towards that level in the months ahead. Investors holding the stock should do so only as long as this level holds.

Medium-term resistances for the stock are at Rs 83 and Rs 105. Long-term trend will improve only on strong move above Rs 150.

Dhanlaxmi Bank (Rs 24.6): This stock too is spinning in to an abyss. It has broken the important long-term support at Rs 42, where it halted in December 2012 as well as in 2009. Long, medium as well as the short term trends are currently down for the stock. Next support for the stock is at Rs 15.

Key medium-term resistance is at Rs 42. The outlook will begin to improve only after this level is crossed. Investors can consider divesting their holding at this juncture and reinvesting on a strong weekly close above Rs 42.

I would like to buy Corporation Bank. What is your advise regarding medium and long term outlook of this stock?

Vasanthi.L.Pai

Corporation Bank (Rs 279.7): It would be best to steer clear of Corporation Bank at this juncture. The stock has been in a structural downtrend since the peak formed in November 2010. This move has dragged the stock below the key support at Rs 400. Despite there being a mild support around Rs 275, the stock might not halt at this point.

Next reliable long-term support for the stock is a long way off — at Rs 150. You can wait for the stock to move back above Rs 400 before buying it.

Those holding the stock should divest on a move below Rs 275. Medium-term hurdles are at Rs 350 and Rs 400. Long-term view for the stock will improve only on a strong close above Rs 500.

Lokeshwarri S.K.

Published on August 03, 2013
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