Query Corner - JSW Steel near long-term support

Please give me the short-, medium- and long-term targets for JSW Steel.

Bhaskar Parab

JSW Steel (Rs 655.9): The short- as well as medium-term trends in JSW Steel are currently down. But the stock is currently halting at its key long-term support at Rs 645.

This level occurs at 61.8 per cent retracement that is a very significant Fibonacci level of the uptrend from March 2009 to October 2010. Reversal above this level will keep the long-term trend up in the stock.

Investors with a long-term perspective can, therefore, hold the stock as long as it trades above Rs 600. Those wanting fresh exposure to the stock can also buy around Rs 650 with stop at Rs 600.

It would, however, not be possible for the stock to take off higher to a new high immediately. It will face resistances at Rs 950 and Rs 1,100 in the months ahead. Investors with short- to medium-term perspective can exit the stock at either of these levels.

Medium-term view will turn positive only if the stock closes above Rs 1,100. Investors should, however, divest their holding on a decline below Rs 600 since the next supports are at Rs 475 and Rs 160.

I bought shares of Reliance Mediaworks at Rs 900 and IL&FS Transportation at Rs 340. Should I wait for my price or should I sell at current market price?

N. Gopalakrishnan

Reliance Mediaworks (Rs 98): This stock is in a severe downtrend since January 2008. The rebound in 2009 did not help matters much, and the stock breached its 2009 low in May this year.

The stock broke below the psychological support at Rs 100 this week. We have to watch if it goes on to break below Rs 90 as well. If it does, the next halt could be at Rs 64. It would be best for investors to switch out of the stock if it declines below Rs 90, and consider reinvestment on a close above Rs 150.

The stock could struggle to move above Rs 186 and then Rs 239 in the months ahead.

IL&FS Transportation Networks (Rs 189): This stock reached its life-time high of Rs 367 in September last year. But it has been in an incessant slide ever since. It hit an all-time low of Rs 185.3 in May, and after a brief rally, is once more close to this trough.

Short-term investors can hold the stock only as long as it trades above Rs 185. Since the stock has limited trading history, it is hard to know where the slide will stop once this trough is shattered. Investors should, therefore, divest their holding on a move below this level.

The stock will face strong short-term hurdle at Rs 230. Next resistance is at Rs 256 and fresh investments in this stock are recommended only on a close above this level. Long-term resistances are at Rs 278 and Rs 299.

Kindly give me the medium- to long-term outlook for Tata Consultancy Services.

Vivek Agarwal

TCS (Rs 951.2): TCS has surpassed expectations over and over again since the March 2009 trough. It raced past our outer target at Rs 1,020 given in our review of this stock in July 2010, to record a life-time high of Rs 1,247 in April.

After showing remarkable strength by consolidating sideways in the band between Rs 1,100 and Rs 1,250 over the last three months, the stock has recently yielded to gravity and broken below the medium-term support at Rs 1,100.

The decline in this stock since the first week of August appears serious enough to qualify as the retracement of the entire up-move from March 2009 low. Retracement targets where this correction can halt are Rs 939, and then Rs 850.

It is hard to envisage a decline below Rs 850. If it does, subsequent supports are Rs 736 and Rs 613. Long-term investors can continue to hold this stock as long as it trades above Rs 600.

Key short-term resistances are at Rs 1,056 and Rs 1,205. Fresh purchases from a short-term perspective are recommended only on a close above Rs 1,060. Investors can accumulate in declines as long as it trades above Rs 830.

Please outline the prospects of BGR Energy and HBL Power Systems. When should one buy either of the stock with 24- to 30-month perspective?

H. Shah

BGR Energy Systems (Rs 344.1): The recovery that commenced in the first quarter of 2009 could not get past Rs 871 and the stock is in a severe downtrend since September last year. This downtrend was attempting to hold above the key long-term support at Rs 400 since last March.

But this level was penetrated in the first week of August and fresh purchases with a short-term perspective are recommended only if the stock moves above Rs 400.

Next supports, if the stock continues its decline are at Rs 257 and then the 2009 trough at Rs 107. The stock will face strong resistance at Rs 400 in the near-term. If this level is surpassed, subsequent resistances would be at Rs 550 and Rs 665.

HBL Power Systems (Rs 15.2): HBL Power Systems is spiralling lower since its peak of Rs 45.6 recorded in January 2010. The stock has crashed below its key long-term support at Rs 23 and appears to be heading towards March 2009 trough at Rs 9.

Investors should wait for a strong rebound before attempting to catch this falling knife. Weekly close above Rs 26 should act as a cue to alert investors that this stock is on its way to a sustained recovery.

Please let me know the prospects of Prism Cement.

Vimal

Prism Cement (Rs 44): Prism Cement was relatively resilient in the market correction since last October, and has been moving sideways in a band between Rs 45 and Rs 65. The uptrend that began from October 2008 low of Rs 13.5 continues to be in force in this stock.

If it manages to hold above Rs 42 in the current bout of correction, it can spend some time in the band between Rs 43 and Rs 65 before breaking higher to the 2008 peak of Rs 79.5.

Supports on a breach below Rs 43 are at Rs 40 and Rs 33. Long-term investors can buy in declines as long as the stock trades above the second support.

I bought Orchid Chemicals at Rs 245. Should I stick to this stock or sell it?

Abhinav Krishna

Orchid Chemicals & Pharmaceuticals (Rs 198.2): Orchid Chemicals has been falling like a stone since July, and is down 40 per cent since then. Investors can, however, draw courage from the fact that the stock is currently halting at key long-term support at Rs 167.

Investors can continue to hold the stock as long as it trades above Rs 160. Bounce from this level can take the stock higher to Rs 234, Rs 255 or Rs 277 in the months ahead.

However, decline below Rs 160 can spell trouble for the stock since it can then slide to Rs 128 or even Rs 78.

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