Query Corner: Reliance Power hovering at psychological resistance

Please advise me on the long-term outlook of Reliance Power.

J. Senthan

Reliance Power (Rs 105.3): In September 2011, we had reviewed Reliance Power and written that investors could hold this stock as long as it traded above Rs 70. The stock bottomed after testing this support fleetingly in December, and is currently attempting to move higher. The stock has psychological resistance at Rs 100 and it is also the level it made in the recent peak of last November.

Move above Rs 100 can take the stock higher to Rs 127 or Rs 156 in the months ahead. Investors who are not in the stock for the long haul can hold with stop at Rs 65 and exit at either of these hurdles.

The long-term trend decider stays at Rs 200. Inability to move beyond this hurdle will result in the stock vacillating in the band between Rs 70 and Rs 200. Subsequent targets are Rs 230 and Rs 264.

Please let me know the prospects of Voltas bought at Rs 98.5.

Manoharan N

Voltas (Rs 99.9): You seem to have purchased Voltas in the recent bounce from the December low at Rs 71.5. This rally is still in a nascent stage and has not progressed sufficiently to qualify as a sustainable medium-term uptrend.

It will face obstacles at Rs 116 and then at Rs 144 in the upcoming weeks. If you have bough the stock with the intention to exit on short-term gains, then you can sell at either of these levels.

The medium-term trend in Voltas will turn positive only when it moves beyond Rs 145. Else, it can decline once again towards the recent low. Targets on move above Rs 145 are Rs 168 and Rs 190.

What is your suggestion on IFCI bought at Rs 36 and L&T Finance at Rs 50?

Kotecha

IFCI (Rs 38.9): IFCI was on an extremely slippery slope in 2011, dropping from the high of Rs 68.5 to Rs 20 in December. That said, a nascent rally is in progress since the December trough. This rally has brought the stock close to your purchase price.

Short-term resistances for the stock are at Rs 39 and Rs 43. Reversal below the second resistance will imply that the medium-term trend remains down.

The possibility of the stock sliding down to Rs 19.6 or Rs 15.2 then remains open.

Weekly close above Rs 43 is needed to suggest that the medium-term trend is reversing higher. Subsequent targets are Rs 50 and Rs 57.

Key long-term resistance is at Rs 80. It is hard to envisage a move beyond this level to the former life-time high peak of Rs 121 since that peak was hit in the last frenzied stage of a multi-year bull market.

L&T Finance Holdings (Rs 48.3): This stock does not have sufficient trading history to enable us to give an opinion on its technical prospects. It is moving in a broad band between Rs 42 and Rs 53 since listing in August last year.

Investors can, therefore, hold the stock as long as it does not close below Rs 40 on a weekly basis.

Resistances will be around Rs 49 and then at Rs 52. You can sell the stock at either level if you are in it for short-term gains. Stop for short-term investors can be Rs 45 while long-term investors can hold with stop loss at Rs 42.

Please advise me on Cummins India and Alstom Projects.

S. Mallah

Cummins India (Rs 458.9): Cummins India has long-term supports at Rs 340 and Rs 288. These levels are the 50 and 61.8 per cent retracement of the up-move from March 2009 trough. The stock bounced off the first support last December. This rally will have difficulty moving above Rs 482 in the near term.

Reversal below this level will drag the stock down towards the above mentioned supports again. Conversely move above Rs 482 will take the stock higher to Rs 578 or Rs 600. The stock could struggle to move beyond Rs 600 just yet. But if it manages to do so, then the next target would be Rs 795.

Alstom Projects (Rs 371): Alstom Projects took a steep dive last November and December. The stock lost 47 per cent of its price in these two months.

This decline made it penetrate the key medium-term support at Rs 450. The outlook will improve only if it goes on to close above this level again.

Long-term supports for the stock are at Rs 220 and Rs 190. If the stock is unable to move above Rs 450 in the upcoming weeks, it will mean that a decline to these long-term supports will be possible.

Medium-term hurdles will be at Rs 500 and Rs 650. The long-term outlook will turn positive only when the stock moves beyond the resistance at Rs 750.

I bought Kalindee Rail Nirman (Engineers) at Rs 180. Should I hold this stock or sell?

N Gopalakrishnan

Kalindee Rail Nirman (Rs 118.1): This stock has not yet recovered from the battering it received in 2008. The rallies since then have not aided even one-third retracement of the previous decline.

Any uptrend is likely to face resistance in the band between Rs 200 and Rs 250 in the next two years. As long as the stock trades below this band, it is likely to oscillate between Rs 80 and Rs 250.

Medium-term hurdles for the stock would be at Rs 130, Rs 160 and Rs 202. You can exit the stock on reversal from either of these levels.

I am holding shares of Gujarat Reclaim purchased at an average price of Rs 1,025. Should I continue to hold this stock or book profit?

Sandip Vora

Gujarat Reclaim & Rubber Products (Rs 1,335.5): This stock is in a strong uptrend. The support that medium-term investors need to watch out for is at Rs 1,150. This can serve as stop-loss for you as well. Subsequent supports are Rs 1,040 and Rs 932.

The uptrend will gather speed once it moves beyond Rs 1,500. Next target for the stock is Rs 1,959.

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