Query Corner: Nagarjuna Construction hovering above key support

Kindly elaborate the short and long-term view on Nagarjuna Construction Company. Narendra Pai

Nagarjuna Construction Company (Rs 115.1)

In our review of Nagarjuna Construction in July last year we had advised investors to hold the stock with the stop at Rs 145. We had given the targets on breach of Rs 145 at Rs 120 or Rs 100. The stock could not get past the resistance in the zone between Rs 190 and Rs 195 and declined to the low of Rs 111 on January 17. Key medium-term support is at Rs 100 and investors with a long-term perspective can wait for a strong close below this level before divesting their holding.

Long-term view will however turn very bleak on a close below Rs 100 paving the way for a decline to March 2009 low of Rs 34. Short-term resistances for the stock are at Rs 145 and Rs 165. Key long-term resistance is at Rs 240. Failure to move above this level can make the stock move in a range between Rs 100 and Rs 250 over the next year.

Please let me know the technical view on GIC Housing Finance. Roohi Raashi

GIC Housing Finance (Rs 115.6)

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GIC Housing Finance broke out of the upper boundary of its medium-term trading range at Rs 100 in June 2010 and then launched a searing uptrend that took it to the peak of Rs 161 by November.

A medium-term correction is however in progress currently that appears to be retracing the entire up-move from the March 2009 low. Immediate support for the stock is in the band between Rs 100 and Rs 110. Investors with short to medium term perspective can hold the stock as long as it trades above this zone. Subsequent supports are at Rs 95 and Rs 80. Rs 80 can serve as the stop-loss for long-term investors.

The stock will face resistance at Rs 140 or Rs 160 over the medium-term. Long-term target above Rs 160 is Rs 180.

Please provide the technical outlook of Ion Exchange and Everest Industries. Usman Ali

Ion Exchange (Rs 160.9)

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Ion Exchange faces strong long-term resistance in the zone between Rs 270 and Rs 300. The stock reversed lower from this zone in September 2004 and again in January 2008 and August 2010. The stock is currently in a steep correction since the August 2010 peak of Rs 264. Key medium-term support is at Rs 132. Long-term investors can hold the stock as long as it trades above this level. Decline below this support will portend a decline to November 2008 low of Rs 55.

Resistances for the upcoming months would be at Rs 217 and Rs 265.

Everest Industries (Rs 170.3)

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This stock raced to the peak of Rs 285 in August 2010 and is in a deep correction since then. The down-move from this peak has already retraced half the gains made from the March 2009 trough. Key support is however at Rs 136 and long-term investors can hold the stock as long as it trades above this level. Breach of this support can drag it to the 2009 trough at Rs 43.

Everest Industries will face resistance from Rs 215 and Rs 240 in the months ahead. Rally above the second resistance will take the stock back to its life-time high. It is however quite likely that the stock vacillates in the band between Rs 150 and Rs 250 over the next 12 months.

I would like to know the short and long-term support and resistances for Shipping Corporation of India. Ajay Rao

Shipping Corporation of India (Rs 121.2)

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Shipping Corporation of India is in a structural uptrend since 2001. Every major correction since then has halted near the significant 61.8 per cent Fibonacci retracement level. The cut was however a little deeper in 2008 implying that one leg of the long-term uptrend ended in January 2008.

The recovery from March 2009 trough took the stock close to its January 2008 peak at Rs 221. The zone between Rs 200 and Rs 220 is now a strong long-term resistance for the stock and it can struggle to move beyond this zone just yet.

Ongoing correction has key support at Rs 120. The stock is currently testing this level. Close below Rs 120 will accelerate the decline to Rs 95 or even Rs 70. Investors with short-term perspective should therefore divest their holding on a close below Rs 120. Short-term resistances are at Rs 150 and Rs 170.

Can we buy Finolex Cable and Anant Raj Industries at current levels? R Sandhya Lakshmi

Finolex Cables (Rs 49.2)

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Finolex Cables faces key long-term resistance in the band between Rs 60 and Rs 65. The stock was unable to surpass this level since January 2010. The stock however has support at Rs 46 and sideways move between Rs 46 and Rs 65 for few more months can be followed by an upward break-out to Rs 75 or Rs 89 over the long-term. Investors with short to medium-term perspective can therefore buy the stock in declines with stop at Rs 45.

Decline below Rs 45 will imply that the stock is heading to Rs 41 or Rs 35. Long-term investors can hold the stock with deeper stop at Rs 35.

Anant Raj Industries (Rs 97.4)

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Anant Raj Industries is also testing its key support at Rs 100. This level occurs at 50 per cent retracement of the up-move from April 2009 low. It is also an important psychological support. Investors can buy the stock once it bounces above this support after briefly moving below it. Next support for the stock is at Rs 85 and investors can watch for a reversal from this zone should it decline strongly below Rs 95.

Short-term resistances for the stock are at Rs 120, Rs 135 and Rs 160. Break-out above Rs 160 can take the stock to Rs 220 or Rs 260.

I have Gitanjali Gems bought at Rs 205 and would like to know the technical outlook for the stock. Uma

Gitanjali Gems (Rs 209.2)

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This stock recorded an exhilarating rally from the low of Rs 94 in June to Rs 395 in November last year. But the fall from this peak was equally dramatic and the stock crashed 60 per cent in just five weeks. Immediate support for the stock is at Rs 175 and investors can hold the stock as long as it trades above this level. Short-term rebounds have the targets of Rs 250 and Rs 306.

It would however be best to divest your holdings on a close below Rs 170 since the next downward targets are Rs 150 and Rs 90.

I have purchased Meghmani Organics at an average price of Rs 17. Should I continue to hold it? Mohan.M

Meghmani Organics (Rs 16.9)

Meghmani Organics has strong long-term resistance at Rs 24. The stock has to record a weekly close above this level to kick-start a rally to the next long-term targets at Rs 30 and Rs 35. Inability to move beyond Rs 24 can make the stock oscillate in the band between Rs 12 and Rs 24 over the ensuing months.

Investors with short-term perspective can hold the stock with stop at Rs 14 and divest it in the resistance zone between Rs 21 and Rs 24. Long-term investors can accumulate the stock around Rs 12 with stop at Rs 11.

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