QUERY CORNER: Sterlite Ind reversing from long-term support

Please advise me on the outlook for Sterlite Industries and UCO bank bought at Rs 130 and Rs 65 respectively.

K. Kunhiraman

Sterlite Industries (Rs 113.9): After peaking out in January 2010, Sterlite Industries has been on a long-term downtrend. In August 2011, the stock broke through a key support at Rs 150 and accelerated downwards. But, its long-term support at Rs 86 provided base in December 2011 and the stock changed its direction. Investors with long-term perspective can consider buying the stock on declines with stop-loss at Rs 86. A strong move above the immediate resistance at Rs 130 will take the stock northwards to Rs 150 and to Rs 165 in the long-term. Nevertheless, a tumble below Rs 86 will drag the stock down to the Rs 70 - 74 range.

Short-term trend has been up for the stock ever since bottoming out last month. But it is likely to face key resistance at Rs 120 in the days ahead. Failure to move above this resistance will pull the stock down to Rs 100. Significant supports below this level are at Rs 95 and Rs 86.

UCO Bank (Rs 62): UCO Bank accelerated sharply in 2010, from Rs 60 to Rs 152. But, it peaked out in November 2010 and has been on a long-term downtrend since then. After bottoming out at Rs 45 on January 2 this year, the stock has been on a near-term uptrend. It currently faces key resistance at your buy price. Strong break through at Rs 65 will lift the stock higher to Rs 75 and to Rs 80 in the medium-term.

Only a strong jump above the stock's long-term resistance level at Rs 80 will pave way for a rally to Rs 90 and to Rs 100 in the long-term. You can take profits off the table if the stock fails to move above Rs 80. Long-term key support for the stock is positioned in the Rs 52-54 band. You can place stop-loss at Rs 52 and hold the stock. A strong fall below Rs 52 will pull the stock down to Rs 45. A penetration of this level will pull it further down to Rs 36 in the long-term. Immediate support is at Rs 57.

I am holding Mahindra Satyam at Rs108 and TVS Motors at Rs 71. Could you please advise me on the medium-term outlook?

Deepak

Mahindra Satyam (Rs 71): The stock has been on a medium-term sideways consolidation in the range between Rs 61 and Rs 80 since August 2011. Its long-term support between Rs 60 and Rs 64 has been cushioning the stock during this consolidation phase. Investors with long-tem perspective can consider holding the stock with stop-loss at Rs 60.

An emphatic dive below this level can pull the stock down to Rs 50 and Rs 40 in the long-term. On the other hand, a strong close above Rs 80 is needed to bring optimism in the stock and take it higher to Rs 95-100 range in the medium-term. A decisive move above Rs 100 will alter its trend upwards and take it to Rs 115 and Rs 130.

TVS Motors (Rs 51.2): After retracing 50 per cent of the Fibonacci retracement level of its prior up move (between early 2009 and late 2010), the stock found support at Rs 47 February 2011. Since then, Rs 47 levels has been providing support for the stock . The stock is presently hovering just above this key level. Investors should divest from the stock if it slumps below Rs 47 emphatically. In that case, the stock can roll down to Rs 40 and to Rs 32 in the long-term.

Medium-term trend has been down for the stock from its October 2011 peak of Rs 70. Strong up move above Rs 58 is required to reverse this downtrend and take the stock upwards to Rs 65 and Rs 70 in the medium-tem. Breakthrough of resistance at Rs 70 will push the stock higher to Rs 80 and Rs 89 in the long-term.

Please let me know the short- and medium-term targets and supports for Opto Circuits bought at Rs 215.

Manoharan N.

Opto Circuits (Rs 234.9): The stock appears to have bottomed out after forming a strong base at around Rs 190 during November and December 2011. It has been on a short-term uptrend since than. Last week, the stock jumped nine per cent with good volumes, decisively penetrating its medium-term downtrend-line. It is hovering well above its 21- and 50-day moving averages. Investors with a long-term perspective can consider holding the stock with stop-loss at Rs 185. Short-term target for the stock is Rs 250, which is the immediate resistance level. Strong move above this level will give a medium-term target of Rs 270 and Rs 280. Inability to move beyond Rs 270 will be a cue for taking profits.

A strong close above Rs 300 is required to lift the stock higher to Rs 325 and Rs 342. On the other hand, emphatic drop below Rs 190 will pave way for a decline to Rs 165 and Rs 150. Short-term supports are pegged at Rs 210 and Rs 190.

I would like to know the technical aspects for GTL bought at Rs 72.

Ganesh

GTL (Rs 46.7): GTL was decimated badly in June 2011 from Rs 400; the stock witnessed a free fall to below Rs 100 levels. Its long-term support at Rs 50 cushioned the stock for a brief time in August 2011. But this support was damaged strongly in November and the stock registered a multi-year low at Rs 29 in December. The stock is in a corrective up move and is testing its long-term resistance at Rs 50. A vital move above this resistance will take the stock higher to Rs 72 in the medium-term.

Nevertheless, failure to move above Rs 72 will confine the stock moving sideway in a broad trading range between Rs 29 and Rs 72. Immediate support is at Rs 40.

Significant jump above Rs 72 will push the stock higher to the Rs 90-100 zone. The stock is in a long-term downtrend and in bear's grip. Investors can make use of rallies to switch out from the stock.

Kindly advise on Berger Paints bought at 106. I bought it with a target of around Rs 140.

Narasimhan

Berger Paints (Rs 95.3): Berger Paints has been moving sideways in a broad range between Rs 77 and Rs 115 since September 2010. Finding support at the lower boundary of the sideways consolidation phase in December, the stock started to move higher. But encountering resistance at Rs 98 last week, the stock is testing it. A convincing move above the aforementioned resistance will push the stock higher to Rs 115 in the medium-term.

Your target of Rs 140 is too optimistic and only a strong move above Rs 115 can take the stock higher, that too to Rs 125 levels. Partial profit-taking can be considered at Rs 115, if the stock struggles to move higher, while maintaining stop-loss at Rs 87. But, a fall below Rs 87 will pull the stock down to Rs 80 or even to Rs 75. Next long-term support is pegged at Rs 65.

I purchased Indian Overseas Bank at Rs 178. What is the long-term outlook?

RM Kumarappan

Indian Overseas Bank (Rs 86.7): The stock's long-term support at around Rs 73 provided base for it by arresting its decline early this month. Investors with a long-term horizon can consider buying the stock on declines with stop-loss at Rs 70. The stock is in a near-term up move. A resounding jump above Rs 90 will take the stock upwards to Rs 102 in the medium-term.

Strong rally above Rs 120 is required to alter the stock's long-term downtrend and push the stock higher to Rs 140 or to Rs 152 in the long-term. But, a plunge below Rs 70 will pave way for a decline to Rs 60 in the same period.

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