Query Corner: SKF surges, defying broader market

I purchased Crompton Greaves at an average price of Rs 151. Kindly let me know the targets for this stock.

Avanti Padhye

Crompton Greaves (Rs 160.3): In our review of Crompton Greaves in March this year we had advised investors to hold the stock only as long as it traded above Rs 215. We had indicated that decline below Rs 215 could pull the stock lower to Rs 206 or even Rs 172.

The stock declined slightly below the lower-most target to record the low at Rs 133 in August this year. Investors still holding on to the stock can lower their stop-loss to Rs 120. The stock could attempt to find its feet in the band between Rs 120 and Rs 150 in the upcoming months. However, breach of the lower band can pull the stock down to Rs 90 or even Rs 60.

Short-term resistance will be at Rs 190 or Rs 220. Key medium-term resistance is also at Rs 220 and investors with short- to medium-term perspective can divest their holding on failure to move above this hurdle. Medium-term trend will turn positive only on a close above Rs 270.

I recently purchased Ess Dee Aluminium at Rs 180 and Gayatri Projects at Rs 138. Please advise me on the long-term prospects of these stocks.

C.U. Prabhu

Ess Dee Aluminium (Rs 185.9): The long-term trend in Ess Dee Aluminium is down since the January 2008 peak of Rs 843. Following a brief hiatus between January 2009 and June 2010, this structural downtrend resumed.

The medium- as well as the short-term trend in the stock also reversed lower in August this year as it plunged below the key medium-term support at Rs 270.

The pattern in the weekly chart is negative and the stock can move lower to Rs 126 or even Rs 110 in the days ahead. Long-term investors can hold the stock with stop at Rs 110. If the stock reverses higher from current levels, it can move on to Rs 315 or Rs 395 in the months ahead.

Investors with a shorter investment horizon can divest their holdings at either of these levels. Long-term trend will turn positive only on a strong weekly close above Rs 520.

Gayatri Projects (Rs 140.5): Gayatri Projects too is precariously poised since it has breached its key medium-term support at Rs 200. The stock could head lower to Rs 70 or Rs 41 in the days ahead and investors with lower risk-taking ability can switch out of this stock at this juncture. Those who wish to hold on can do so with stop at Rs 120. Near-term outlook for the stock will turn rosy only when it goes on to close above Rs 230. Key medium-term resistance will be at Rs 265 and then at Rs 345.

What are the prospects of Everest Industries? Can I buy the stock with an investment horizon of 1-3 years?

Navendu Sharma

Everest Industries (Rs 147): Everest Industries went into a tailspin in the last quarter of 2010 that dragged it down from the height of Rs 282 to Rs 127. The long-term trend in the stock, however, continues to be up and investors can hold it with stop at Rs 120. The stock could attempt to form a base in the zone between Rs 120 and Rs 140.

If it manages to hold above Rs 120, the stock could rally to Rs 190 or Rs 225 in the months ahead. Medium-term view will, however, turn positive only on a close above Rs 225. That will pave the way for rally to the previous peak of Rs 285.

Conversely, strong close below Rs 120 will pull the stock down to Rs 82 or even to the March 2009 low at Rs 43.

Can Sun TV Network and Sundaram-Clayton be bought at current levels? What are the long-term prospects for these stocks?

Anil

Sun TV Network (Rs 276.3): In our review of Sun TV Network in September last year, we had indicated that the stock could move up to Rs 550 or Rs 600 in the near-term. We had also written that since extrapolation of the up-move from March 2009 lows gave the first target at Rs 560, investors with a lower holding period should exercise caution in the band between Rs 550 and Rs 600.

The stock formed a peak at Rs 556.5 in January this year and is in a serious correction since then. This correction has pulled the stock below the key support at Rs 450 indicated in our previous review as well as the medium-term trend decider at Rs 290.

Investors, however, can hold the stock with stop at Rs 200 since it is attempting to reverse higher following the recent trough at Rs 214 formed on October 4. If this rally sustains, the stock could move higher to Rs 350 or Rs 430 over the ensuing months. Investors with lower holding capacity can exit the stock at either of these resistances.

Medium-term view will, however, turn positive only on a close above Rs 430, next target being at Rs 550. Supports on a strong decline below Rs 200 are at Rs 180 and Rs 136.

Sundaram-Clayton (Rs 140.3): This stock never recovered from the bludgeoning it received from the bear market of 2008 that took it to the low of Rs 26. The recovery in 2009 could retrace only one-third of the loss, and the stock is once again sliding lower.

Key medium-term support for the stock is at Rs 115 and investors can hang on to the stock as long as it trades above this level. However, decline below this level will accelerate the decline to Rs 56 or even lower.

The stock will face hurdle at Rs 180 and Rs 208 in the upcoming months. Long-term view will turn positive only on close above Rs 286. Subsequent targets are Rs 370 and Rs 450.

I bought Unitech at Rs 45. What are its short- and medium-term prospects?

Ahammed Shebeeb P.A.

Unitech (Rs 27.3): Unitech did not have it easy over the last 12 months and the stock has been continuously marking lower troughs. The stock is currently poised at its March 2009 low of Rs 25. Since this level has not been tested in the last five years, investors can hold on to the stock as long as it trades above Rs 25.

However, breach of this level will drag Unitech below Rs 10. Short-term resistances will be at Rs 40 and Rs 49. Investors with short-term perspective should venture to buy the stock only if it goes on to close above Rs 50. Medium-term resistances are at Rs 61 and Rs 62.

Key long-term resistance band for the stock is between Rs 180 and Rs 200. This band needs to be surpassed to signal that the worst is behind.

Please give your technical outlook for SKF India.

Altaf Hussain

SKF India (Rs 653.5): SKF India is one of the rare stocks that have skirted the carnage in broader market over the last 12 months to move on to new life-time high. There was a sharp correction from the September 2010 peak of Rs 620, but the stock shrugged this off in no time to gain 26 per cent this year.

Short-term supports are at Rs 616 and Rs 570 and short- and medium-term investors can buy the stock on reversal from either of these levels. Medium-term supports for the stock are at Rs 505 and Rs 475. Investors with a longer investment horizon can buy the stock with stop at Rs 470.

If SKF manages to hold above Rs 475, there is a strong possibility of the stock breaking out to Rs 800 over the long-term.

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