Query Corner: BHEL at critical long-term support

Lokeshwarri S.K. | Updated on September 01, 2012 Published on September 01, 2012

BHEL Unit comming up at Tirumayam in Pudukottai district. -Photo:R.M. RAJARATHINAM.

I am holding Ashok Leyland and BHEL. Please let me know whether I should hold these stocks or exit?

Arun Gupta

Ashok Leyland (Rs 20.7): Ashok Leyland is in a long-term corrective decline since the peak of Rs 41 recorded in December 2010. This correction has dragged the stock to its key long-term support at Rs 19.5 that occurs at 61.8 per cent retracement of the up-move from 2008 trough.

Investors can hold the stock with stop at Rs 18. It is possible that the stock manages a long-term trough in the zone between Rs 18 and Rs 20. Reversal from here can take the stock higher to Rs 28 or Rs 33 in the months ahead. Investors with short- to medium-term perspective can divest their holding at either of these levels.

The stock could, however, struggle to get past the hurdle at Rs 33 just yet. If it manages to do so, next target would be its previous life-time high at Rs 41. Conversely move below Rs 18 will result in the stock slipping to Rs 15.

BHEL (Rs 214.3): BHEL is slipping and sliding woefully since the August 2010 peak of Rs 539. But it is not recommended to exit the stock at this juncture. In fact, this is the point at which the bravehearts can go out and buy the stock. The stock is in a wide trading band between Rs 200 and Rs 550 since March 2007. Since the stock is close to the lower end of this long-term trading range, investors can buy the stock with stop-loss at Rs 180.

Those holding the stock can continue to do so with the same stop-loss.

Medium-term resistances for the stock would be at Rs 328 and Rs 409.

Long-term view will turn positive only on a close above Rs 410. That will set the stage for a rally to the stock’s long-term ceiling between Rs 530 and Rs 600.

Could you please advise me on the medium- and long-term outlook of Dabur India and Tata Global Beverages. Can I buy them at current levels?

Anil Kumar Ray

Dabur India (Rs 123.5): The trends along all time-frames, long, medium and short, are up in Dabur India. The stock moved to a new life time high this week. But the stock has long-term resistance around Rs 125, where it formed a peak in March last year. It is possible that the stock reverses lower from these levels and moves down to the support around Rs 92. Investors wishing to buy the stock can therefore wait for a clean break above Rs 130 before doing so.

Short-term support for the stock is at Rs 114 and short-term investors can buy in declines as long as the stock trades above this level.

Key long-term supports are however at Rs 92 and Rs 88.

Declines towards this support band should be viewed as a buying opportunity by investors. Long-term target on strong move above Rs 130 is Rs 150.

Tata Global Beverages (Rs 130.2): This stock is also on a medium- as well as long-term uptrend. The stock moved close to its previous all-time high at Rs 140 in mid-August, and is currently pausing there. Investors should wait for an emphatic break-out above Rs 140 before venturing to buy the stock. Long-term target on a break above this level will be Rs 176.

Inability to move beyond this level will, however, mean that the stock can decline to Rs 100 or even Rs 80 in the months ahead.

Long-term investors can continue to hold the stock as long as it trades above Rs 80.

Please share your technical view on Gravita India and Gabriel India bought at Rs 198 and Rs 26.8 respectively.

M V Gopalkrishnan,

Gravita India (Rs 162): Gravita India is in an uptrend since the low of Rs 58 recorded in September 2011. This rally halted at the peak of Rs 204 in July and the stock is currently in a corrective mode. Immediate support is at Rs 149. Investors can continue to hold the stock as long as this support holds. The stock can also be accumulated in declines with stop at Rs 147.

Reversal above this support can take the stock higher to Rs 240 or even Rs 296. Supports on a decline below Rs 149 will be at Rs 132 and Rs 115.

Gabriel India (Rs 25): Gabriel India has long-term supports at Rs 20 and Rs 16. The stock is attempting to form a base between these levels and rebound.

It has reversed thrice from the support at Rs 18 since last November. Long-term investors can therefore hold the stock with stop at Rs 15. The stock can also be bought in declines with the same stop.

That said, Gabriel India is facing stiff resistance at Rs 30. Inability to move beyond this level will result in the stock moving in the band between Rs 15 and Rs 30 over the coming months. Target on a strong move above Rs 30 would be Rs 37.

Please let me know your outlook on Kennametal India purchased at Rs 920.

Vilas Gujar

Kennametal India (Rs 896): This stock is in a strong uptrend since the low of Rs 125 recorded in June 2009. One leg of this uptrend appears to have ended at Rs 1,247 in April, and the stock is currently in a corrective mode.

This correction has pulled the stock lower to its key long-term support band between Rs 820 and Rs 850.

Long-term outlook for the stock will turn negative only on a close below Rs 820. Subsequent supports are at Rs 690 and Rs 560. Long-term target on a break above Rs 1,250 is Rs 1,515.

Published on September 01, 2012
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