Query Corner: Ambuja Cements attempting to rebound

Please advise on the short- and long-term outlook for Central Bank of India and Ambuja Cements.

T. Jayakumar

Central Bank of India (Rs 72.3): This stock is poised close to an important support from both short- as well as long-term perspective. Central Bank of India has reversed higher from the zone between Rs 60 and Rs 65 in January and again in September 2012. Investors can, therefore, hold the stock with stop-loss at Rs 60.

Reversal from here can take the stock higher to Rs 95 or Rs 120 in the months ahead. But long-term view will turn positive only on close above Rs 120. Subsequent long-term targets are Rs 137 and Rs 155.

Fresh purchases are, however, not advised on close below Rs 60. Decline below this level will mean that the stock could be heading towards its 2009 low at Rs 25.

Ambuja Cements (Rs 189.5): The movement of Ambuja Cements since the 2008 can be confined into an upward moving trend channel. The stock took support at the lower line of this channel in April this year, and the stock is attempting to rebound. Short-term support for the stock is below the recent trough at Rs 160. Long-term support is present at Rs 152.

Investors can buy the stock in declines as long as it trades above Rs 160. Long-term supports on decline below this level are at Rs 130 and Rs 110.

Short-term resistances for the stock are at Rs 200 and Rs 220. It might be difficult for the stock to break out beyond Rs 220 just yet and sideways move between Rs 160 and Rs 220 is possible for a few months. Target on break above Rs 220 is Rs 270.

Please advise on the medium-term prospects of SpiceJet.

P.P. Abdullah

SpiceJet (Rs 38.6): SpiceJet has made a long-term trough at Rs 15 in December 2011 and the trend since then has been up. Key medium-term support for the stock is in the band between Rs 25 and Rs 30. Investors can hold their positions as long as the stock trades above Rs 25.

That said, the stock will face air-pockets in the zone between Rs 47 and Rs 51. This zone is a critical long-term resistance since it occurs at 38.2 per cent retracement of the down-move from the November 2010 peak. The recent peak at Rs 51 formed in July 2012 too makes this an important medium-term resistance.

Investors with a medium-term perspective can, therefore, exit as the stock approaches the aforementioned ceiling. Reversal from this zone can keep the stock in the zone between Rs 30 and Rs 50 for rest of this year.

Long-term target on break above Rs 50 is Rs 56 and Rs 66.

I have bought Reliance Communications at Rs 106. Can I hold on to this stock?

Vanaja 

Reliance Communications (Rs 111.1): There has been a buzz of activity around Reliance Communications stock since April as the stock price more than doubled from the trough at Rs 50. The short-term trend in the stock is currently up. But investors need to exercise caution since the stock is nearing the resistance around Rs 110.

Reversal from this zone can result in the stock declining to Rs 75 or Rs 50 in the coming weeks. Stop-loss for the short- and medium-term investors can be at Rs 88.

Key long-term support for the stock is in the zone between Rs 45 and Rs 50. Strong close above Rs 160 is needed to signal that the long-term trend could be turning positive.

I have purchased Balkrishna Industries at Rs 302 and Everest Industries at Rs 252. Should I book loss and exit?

S.L. Shrotri

Balkrishna Industries (Rs 284.8): There is no need to exit the Balkrishna Industries stock. It has been stuck in a sideways range between Rs 250 and Rs 320 since March 2012. This sideways move follows a strong uptrend from the January 2011 low at Rs 109. Therefore, this can be construed as a consolidation phase before the uptrend resumes.

Investors can hold the stock with stop-loss at Rs 235. Fresh purchases can also be made in declines with the same stop. The stock could continue to face resistance in the zone between Rs 300 and Rs 320. Target on a break above Rs 320 is Rs 350 and then Rs 406.

Everest Industries (Rs 188.8): This stock has been in a sharp decline since the peak of Rs 282 recorded in January this year. But the key medium-term support that investors need to watch out for is at Rs 135. You can hold your position with stop-loss at Rs 130.

Rebound from current level can take the stock higher to Rs 222 or Rs 246 over the months ahead. Breakout above Rs 246 can take the stock towards its previous peak at Rs 282.

I purchased shares of Gravita at an average price of Rs 43. Can I sell it or hold?

R. Krishnamurhty

Gravita India (Rs 32.8): Gravita is attempting to stabilise after its steep fall in March. Immediate support for the stock is around Rs 26 and investors can hold the stock only as long as it trades above this level. It is hard to tell where the decline can halt once this level breaks. Resistances are placed at Rs 46 and Rs 61.

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