Market Strategy

QUERY CORNER - HDFC in sideways consolidation phase

Yoganand D. | Updated on June 09, 2012

Visitors at a HDFC property exhibition. Sampath Kumar






I am a long-term investor, holding shares of Opto Circuits at Rs 250 and Multi Commodity Exchange of India (MCX) at Rs 1,280. Kindly advise the prospects and future growth of these shares.


Opto Circuits India (Rs 154.4): The stock peaked out around your buy price at Rs 252 in September 2010. Since then, it has been on a long-term downtrend. In February 2012, the stock encountered resistance around Rs 220 and continued its long-term downtrend.

Medium-term trend is down for the stock since this February. As long as the stock trades above the key long-term support band between Rs 140 and Rs 150, long-term investors can hold the stock with stop at Rs 140. A fall below this band will reinforce the bearish momentum and pull the stock down to Rs 120 and then to Rs 100 in the forthcoming months.

An upward reversal from the aforesaid support range will lift the stock higher to Rs 175 levels and then to Rs 190. Only a strong rally above the Rs 210 and Rs 220 zone will alter the stock's downtrend and take it higher to Rs 260 in the long-term.

Multi Commodity Exchange of India (Rs 1,030.9): The stock of Multi Commodity Exchange of India got listed only in early March this year. As it has limited history, it is hard to foresee its long-term prospects. Since early March, the stock has been on a medium-term downtrend. After making an all-time low at Rs 838 on May 31, the stock changed its trend triggered by positive divergence in daily relative strength index.

MCX is currently testing its immediate resistance at around Rs 1,030. A strong rally above this level will push the index higher to Rs 1,150, which is 50 per cent Fibonacci retracement level of the stock's prior decline. Next important resistance is pegged at Rs 1,240. Decisive jump above Rs 1,240 will give a medium-term target of Rs 1,385. Investors with a long-term perspective can hold the stock with stop-loss at Rs 838. It is hard to envisage where the next low will be if the stock declines below the Rs 838 in the medium-term.

Kindly advise whether I can buy Rashtriya Chemicals and Fertilizers (RCF) at current levels for the long-term. What is the medium-term outlook of this stock?

J. Senthan

Rashtriya Chemicals and Fertilizers (Rs 58.6): Ever since peaking out in December 2010 at a high of Rs 132, RCF has been on a long-term downtrend. Medium-term trend is also down from this February high of Rs 73. However, the stock found support at Rs 53 in early May and is reversing higher backed by positive divergence.

Investors with a medium-term perspective can buy the stock with stop-loss at Rs 53. Targets are Rs 64 and then Rs 70. Nevertheless, long-term investors can consider buying the stock only if it surpasses its key long-term resistance at Rs 80. In that event, the stock can rally to Rs 92 and then to Rs 100 in the long-term.

Conversely, a conclusive fall below Rs 53 will strengthen the stock's medium-term downtrend and pull it lower to Rs 46 or Rs 42 in the medium-term. Subsequent important support is around Rs 33.

Kindly discuss the long-term outlook of Housing Development Finance Corporation and Glenmark Pharmaceuticals.


Housing Development Finance Corporation (Rs 655.4): Following a strong rally from March 2009 low of Rs 223 to September 2010 peak of Rs 780, the stock started to consolidate sideways. Since then, the stock has been on a sideways consolidation phase in a wide range between Rs 600 and Rs 730. From a long-term perspective, this sideways movement appears to be positive.

An emphatic breakthrough of the stock's upper boundary at Rs 730 will strengthen the bullish momentum and pave the way for a rally to Rs 780 and to Rs 800 in the long-term. But a decline below Rs 600 can pull the stock down to Rs 550. Investors with a long-term perspective can consider holding the stock with stop at Rs 600. Immediate support and resistance are positioned at Rs 630 and Rs 690 respectively.

Glenmark Pharmaceuticals (Rs 366.9): The stock witnessed steep declines in late 2008 and early 2009; from Rs 680 it fell to Rs 119. However, it bottomed out in March 2009 and has been trending upwards. From its December 2011 trough of Rs 265, the stock has been on an intermediate-term uptrend. The stock is currently testing significant long-term resistance zone between Rs 370 and Rs 390.

A strong rally beyond this resistance will reinforce the bullish momentum and lift the stock higher to Rs 430 and to Rs 500 in the long-term. On the downside, weekly fall below the key long-term support of Rs 290 will drag the stock down to Rs 230 and then to Rs 200 in the same period. Long-term investors can prolong their holdings with stop-loss at Rs 280.

Failure to move above Rs 390 in the ensuing weeks will pull the stock down to the Rs 350 and Rs 340 range. Only a decline below Rs 320 will mitigate the stock's intermediate-term uptrend and drag it down to Rs 290.

Could you please advise on the medium-term prospects of Page Industries?


Page Industries (Rs 2,991.3): Since January 2009 low of Rs 300, the stock has been on a structural uptrend forming rising peaks and troughs. Long- and medium-term trends are up for the stock. But it has been on a short-term sideways consolidation from mid-April 2012, between Rs 2,900 and Rs 3,250. A decline below Rs 2,900 will strengthen bearishness and pull the stock down to Rs 2,815 and 2,760. Short-term resistances are pegged at Rs 3,088 and Rs 3,176.

As long as the stock trades above the key support and medium-term trend deciding band between Rs 2,650 and Rs 2,700, its medium-term uptrend remains in place. The stock can breach Rs 3,250 and trend higher to Rs 3,300 and Rs 3,400 in the medium-term. Nevertheless, a tumble below Rs 2,650 will mar the stock's medium-term uptrend and pull it lower to Rs 2,450 and Rs 2,300.

Readers can send in their queries, on not more than two companies, to Queries can also be sent by post to: Tech Trail, 859/860 Kasturi Buildings, Anna Salai, Chennai 600002. We would endeavour to answer as many queries as possible. However, constraints of space will limit the responses featured under this column.

Published on June 09, 2012

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