Technical Analysis

Query Corner: GlaxoSmithKline Consumer halting at long-term support

Lokeshwarri S.K. | Updated on October 07, 2013 Published on October 05, 2013

It would be best for short-term investors to divest the GSK Consumer stock on a strong decline below Rs 4,000. — Bijoy Ghosh

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What is the view on Everest Industries and Tata Chemicals?

R.B.N. Rao

Everest Industries (Rs 141): This stock is in a deep decline since the January peak of Rs 283. But the long-term prospect of this stock is not seriously challenged since it is halting at the key long-term support at Rs 135. The entire zone between Rs 100 and Rs 140 is a good long-term support and investors can continue to hold the stock as long as it trades above Rs 100.

The medium-term resistances for the stock are positioned at Rs 183 and Rs 220. Investors with short- to medium-term investment horizon can exit the stock at either of these levels.

Long-term trend will turn positive only on a close above Rs 220, paving the way for a rally towards the previous high of Rs 280.

Tata Chemicals (Rs 241): Tata Chemicals is also in a prolonged downtrend since the October 2010 peak at Rs 446. This stock too is halting at key long-term support around Rs 240. The long-term outlook will not be threatened unless the stock records a strong close below Rs 240.

Next long-term support is positioned at Rs 190. But investors should avoid the temptation to bottom-fish once the stock declines below Rs 240.

Medium-term resistances are positioned at Rs 317 and Rs 366. Inability to move beyond the first resistance will mean that the stock could vacillate in the range between Rs 240 and Rs 320 for a few more months.

I hold Himachal Futuristic Communications purchased at an average price of Rs 11 and Mercator purchased at Rs 21. I have been a patient investor who has accumulated shares over longer periods, and so far not sold any stocks in loss (less than average buying price). What is your view on these stocks?

A.S. Kumar

It is true that equity investments pay over a long-term. But it is important that investors invest in stocks with a strong business model, good management, and a good growth record. Many stocks could seem to possess these attributes at the outset, but their prospects could deteriorate over time. In such cases, it is best to sell-out and reinvest the proceeds in a sound company.

Himachal Futuristic Communications (Rs 7): This stock is an example of a stock which failed to live up to its promise. This stock is unlikely to rise to the highs reached in the dot com bubble days above Rs 2,000. The stock has not moved beyond Rs 28 over the last five years.

You can hold the stock with stop-loss at Rs 6. If it holds above this level, it can manage to rise to Rs 12 or Rs 15 where you can sell the stock. Long-term resistance for the stock exists at Rs 21.

Mercator (Rs 14): Mercator recorded a multi-year low at Rs 9 in July and is attempting a fledgling uptrend now. You can hold the stock with stop-loss at Rs 9 and try to exit in rallies to Rs 16 or Rs 22.

Medium-term view will turn positive only on a close above Rs 35 and the zone around Rs 77 is a key long-term resistance for the stock.

Can I hold Hexaware Technology at current levels?

J. Rajagopalan

Hexaware Technologies (Rs 128): This stock is on a roll since the end of this June, gaining 80 per cent during this period. But the stock is currently approaching its key long-term resistance zone between Rs 130 and Rs 140. Investors with short- and medium-term perspective can book profit in this zone.

Those who want to hold on can do so with stop-loss at Rs 108. Subsequent supports are at Rs 104 and Rs 97. Long-term prospects for the stock will be roiled only on a close below Rs 70.

Long-term target on break above Rs 150 is at Rs 206.

Please give your outlook on GSK Consumer Healthcare.

Altaf

GlaxoSmithKline Consumer (Rs 4,340): If we look at the long-term chart of GlaxoSmithKline Consumer Healthcare, a structural uptrend began in the stock from the 2009 low at Rs 491. The stock had an unbridled run — interspersed with very shallow corrections — up to the peak of Rs 6,020, recorded in May this year.

The correction from this peak was a sharp 33 per cent. The stock also halted its decline at 38.2 per cent retracement of the uptrend from the 2009 low. If the stock manages to hold this level, it would mean that the long-term uptrend will resume and take the stock higher to Rs 6,000 or even Rs 7,400 over the long-term.

Medium-term resistances for the stock would be at Rs 4,730 and then at Rs 5,223.

It would be best to divest the stock on a strong decline below Rs 4,000 if your investment horizon is short. Next long-term supports are a long way off at Rs 3,250 and Rs 2,600.

What are the prospects of TVS Motor Company?

Achyutha H.

TVS Motor Company (Rs 42): TVS Motor breached its key long-term support at Rs 38 in June this year. But the stock is now reversing from its next support level at Rs 30. Investors can, therefore, hold the stock with the stop-loss at Rs 27. The stock can attempt to rise to Rs 51 over the medium-term.

Investors with short- to medium-term investment horizon can book some profits at this level, if it fails to move beyond it. Subsequent resistances are at Rs 58 and Rs 65.

Investors are advised to steer clear of the stock if it declines below Rs 27.

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Published on October 05, 2013
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