Technical Analysis

Query Corner: Axis Bank poised at key support

| Updated on: Jun 18, 2011
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I am a long-term investor. I bought Reliance Communications at Rs 140. Please give your outlook on this stock.

Sateesh Kongara

Reliance Communications (Rs 95.1): Reliance Communications is spinning down a bottomless pit. It has breached every conceivable support including its previous life-time low of Rs 131 recorded in March 2009. The stock is currently hovering close to its recent low of Rs 79.6 recorded in May this year. Needless to add that trend along all time-frames — short, medium and long are currently down. The feeble rally seen from the May low does not inspire any confidence.

The stock will have to close above Rs 110 for the medium-term downtrend line to be breached. Investors with short-term perspective should exit the stock if it fails to do so since that would imply that the stock is ready to plumb to new life-time lows. The medium-term view will turn positive only on a close above Rs 190. Investors with low risk appetite should consider investing in this stock only after it closes above this level. Subsequent targets are Rs 221 and Rs 254.

Investors who have been watching helplessly as the stock kept moving lower should switch out at this juncture and consider reinvesting once it moves to a position of relative safety above Rs 190.

Please provide the prospects of Alok Industries.


Alok Industries (Rs 27.1): The long-term trend in Alok Industries continues to be down since the stock has not rallied sufficiently to negate the downtrend from the January 2008 peak of Rs 95. The upward movement from March 2009 trough is, however, encouraging since the stock is moving higher in an upward sloping trend channel. If the stock manages to hold above Rs 20 in the ensuing months, it can move higher to Rs 35 or even Rs 40 over the medium-term. Investors can, therefore, hold the stock with stop at Rs 18.

Critical long-term resistance for the stock is between Rs 40 and Rs 45. As long as the stock trades below this zone, it will stay volatile in the wide trading band between Rs 20 and Rs 45. Investors with a lower risk appetite can, therefore, buy the stock only on a firm weekly close above Rs 45. Subsequent resistances are at Rs 55 and Rs 65.

What are the prospects of Balmer Lawrie & Company?

Balmer Lawrie & Company (Rs 583.1): This stock faces strong long-term resistance in the zone between Rs 675 and Rs 750. It recorded a long-term peak in this zone in March 2006, December 2007, and again in November last year. It, therefore, follows that investors ought to tread carefully as long as the stock trades below this zone. Some profit can also be booked every time it nears this zone.

A medium-term correction is currently on in the stock that will receive support at Rs 480 and Rs 412 in the months ahead. Investors with medium-term perspective can hold the stock with stop at Rs 495 while stop-loss for long-term investors can be at Rs 408.

Sideways movements in the range of Rs 500 and Rs 750 will be positive from a long-term perspective and will pave the way for a rally to Rs 850 or above over the long-term.

What is your short-term view on Canara Bank?

Venkatesh J.K.

Canara Bank (Rs 509.7): One leg of the structural uptrend from March 2009 trough appears to have ended at Rs 844 last November and the stock is currently in a long-term correction. This correction has already retraced half the move recorded from March 2009 to November 2010. It is possible that the stock has formed an important trough at the May low of Rs 494. Investors with medium- to short-term perspective can, therefore, hold the stock with stop at Rs 485.

Key long-term support is, however, at Rs 415 and investors with long-term perspective can hold the stock as long as it trades above this level. Long-term outlook will deteriorate beyond redemption only on a close below Rs 400.

Medium-term resistances will be at Rs 630 and Rs 712. Investors with short investment horizon can divest their holding at either of these levels.

I purchased Axis Bank at Rs 1,200. How is the short- and medium-term trend in this stock?

Anshuman M

Axis Bank (Rs 1,223.3): Axis Bank is also in a medium-term downtrend since last October. But this down-move is currently hovering at critical medium-term support around Rs 1,200. This occurs at 30 per cent retracement of the stock's move from Rs 278 to Rs 1,608. This zone is also important because the stock peaked around this level in January 2008. There is another support just below at Rs 1,095 that medium-term investors can use as stop-loss.

If the stock holds above this level (Rs 1,095), it will be range bound between Rs 1,095 and Rs 1,600 for a few more months. Such a move will, however, be positive from a long-term perspective and portend the possibility of a breakout to Rs 1,900 or Rs 2,000 over the long-term. Conversely, decline below Rs 1,100 will drag the stock further down to Rs 940 or Rs 780.

Stop-loss for short-term investors can be at Rs 1,170. Short-term resistances will be at Rs 1,350 and Rs 1,450.

Can you give a medium term view of Rallis India?


Rallis India (Rs 1,539.4): In our review of this stock in February, we had written that the medium-term range for it was between Rs 1,250 and Rs 1,600. We had suggested the stop-loss at Rs 1,200 for medium-term investors. We still hold the view that sideways movement in this range can be followed by a breakout to Rs 1,800 over the long-term.

Medium-term view will deteriorate only on a close below Rs 1,200, making way for further drop to Rs 1,090 or Rs 970.

I want to buy Infinite Computer and Cinemax for medium-term? Tell me the level at which I can buy the stock?

Akbar Basha

Infinite Computer Solutions (Rs 131) and Cinemax India (Rs 36): Both the stocks that you are considering for investment are consistently recording new lows and are in a strong downtrend. Investing in such stocks is compared to catching falling knives. More often than not, we end up cutting ourselves in such instances. It would be best to invest in stocks which have strong trends as the stock prices reflect the underlying company's fundamentals.

I have purchased shares of TVS Motor at Rs 70. Please let me know the medium- and long-term outlook for this share.


TVS Motor Company (Rs 52.6): The long-term outlook for TVS Motor remains positive. The stock needs to record a strong move below Rs 38 before this view is negated. The stock has currently retraced about 50 per cent of the rally recorded from the March 2009 trough. Investors with medium-term perspective can hold the stock as long as it trades above Rs 47 on a weekly closing basis.

TVS Motor will, however, struggle to move on to a new high in immediate future. The stock is likely to face resistance at Rs 62 and Rs 71 in the months ahead and investors with limited investment horizon can divest their holding at either of these levels.

Published on June 18, 2011

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