Query Corner: Tata Motors parked at critical support

Could you please advise on IDBI Bank and Jindal Steel and Power?

Unnikayarat

IDBI Bank (Rs 85.1): The long-term trend in IDBI Bank reversed lower from the November peak of Rs 202. Investors can, however, draw solace from the fact that it is attempting to stabilise slightly above in the range between Rs 77 and Rs 82. Though the long-term support at Rs 102 has been shattered, investors can continue to hold the stock with the stop at Rs 70.

But breach of Rs 70 can prove disastrous with the stock sliding further to Rs 58 or even Rs 40. Therefore, fresh purchases are not advised on a close below this level.

Key short-term resistance would be at Rs 102. Medium-term resistances are at Rs 125, Rs 140 and Rs 155. Investors with short to medium-term perspective should divest their holding if the stock fails to move beyond Rs 125.

Jindal Steel and Power (Rs 394.6): Jindal Steel is also sliding furiously since February, declining from Rs 663 to Rs 390, loss of 41 per cent. Long-term supports for the stock are at Rs 422 and Rs 342. Since the stock has just declined below the first support, it can now move lower to test the next support that also occurs at 61.8 per cent retracement of the up move from October 2008 trough.

Investors can, therefore, hold the stock with stop at Rs 335. Medium-term resistances for the stock are at Rs 530 and Rs 620. Inability to move above the first resistance will mean that the stock will remain under duress in the months ahead. Investors with shorter investment horizon should, therefore, divest their holding if the stock fails to clear the hurdle at Rs 530 in the medium-term.

Long-term resistance will remain at Rs 750 where the stock formed successive peaks in the period between October 2009 and October 2010. A rounding top formation was seen at this level which is a long-term reversal pattern.

Please discuss the medium- to long-term outlook of Sundaram-Clayton and Ador Welding.

Anil

Sundaram-Clayton (Rs 173.7): Sundaram-Clayton formed a long-term trough at Rs 28 in February 2009. The uptrend that commenced from this trough continues to be in force.

One leg of this up move, however, ended at Rs 244 in September 2010 and the stock is currently is a protracted sideways movement.

Key support that investors need to watch out for now is at Rs 118. Long-term prospects for the stock will stay positive as long as this level holds. This can, therefore, serve as the support for long-term investors.

Medium-term targets for the stock are at Rs 210 and Rs 260. Strong long-term impediment exists in the zone between Rs 250 and Rs 300.

This zone needs to be cleared before the stock can move higher to Rs 370 or Rs 450.

But failure to clear the above mentioned resistance zone will make the stock oscillate in the zone between Rs 120 and Rs 280 over the next few years.

Ador Welding (Rs 134): This stock has a strong long-term resistance around Rs 250. The rally that began from the bear-market low of Rs 77 ended at this level and it once again started declining sharply.

Immediate support for the stock is at Rs 109. If this is breached, the stock can decline to its March 2009 low again.

Long-term investors can hold the stock with stop at Rs 75. Medium-term resistances would be available at Rs 160, Rs 190 and Rs 240. Short- to medium-term investors can divest their holding at either of these levels.

Long-term view for the stock will turn positive only if the stock goes on to record a weekly close above Rs 250.

I have bough shares of Tata Motors at Rs 250. Should I wait or sell at current market price?

Amarendranath

Tata Motors (Rs 212.8): Tata Motors would have given most investors a scare last week as it plunged to the intra-week low of Rs 203. But the stock has important short-term support around Rs 200. It is heartening to note that it reversed higher from this support on Friday.

Investors with short- to medium-term perspective can hold the stock with stop-loss at Rs 190. Bounce from this region will take the stock higher to Rs 250, Rs 276 or Rs 320 in the upcoming months. Short-term investors can divest their holdings at either of these levels.

It could be hard to move beyond Rs 320 over the next year. But if the stock manages to do so, the long-term target for the stock would be Rs 385.

On the flip-side, decline below Rs 190 will mean that the stock can decline to Rs 160 or even Rs 139. Key long-term support stays at Rs 139 and this is the level that long-term investors should be concerned with.

I would like to accumulate YES Bank. Is it advisable?

V.R.L. Rao

YES Bank (Rs 353.2): YES Bank has displayed immense resilience over the last two years. Though one leg of the uptrend ended at Rs 388 in November 2010, the stock is consolidating in a long-term trading range between Rs 230 and Rs 390 since then. It has retraced only 38.2 per cent of its previous long-term uptrend, displaying inherent strength.

Medium-term trend is also up in the stock since the January low of Rs 230. Key short-term support is at Rs 294 and investors can accumulate the stock in declines with stop at Rs 285. Target on a break above Rs 400 is Rs 460.

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