Technical Analysis

Query Corner

Lokeshwarri S.K. | Updated on November 09, 2013 Published on November 09, 2013

I bought Ashok Leyland at Rs 20.6 and HDFC Bank at Rs 682. Can you please provide the technical outlook for these stocks?

Jagadeesh Kumar Balla

Ashok Leyland (Rs 17): The key long-term support for Ashok Leyland exists at Rs 19.5. This occurs at 61.8 per cent Fibonacci retracement level of the rally in the stock, from the 2009 low. The long-term correction that began in the stock in November 2010 held above this level until this July.

But when the stock moved below Rs 19.5, the long-term trend turned adverse. The steep decline thereafter halted at Rs 11.8 in August and a bounce-back is in progress since then. The stock will now face resistance at Rs 19.6 and then at Rs 23 in the medium-term. The zone between Rs 23 and 24 is a key medium-term resistance and investors can divest part of their holdings on inability to surpass this level.

Targets above Rs 24 are Rs 26.4 and Rs 30.

HDFC Bank (Rs 652): HDFC Bank is in a strong structural uptrend since March 2009. This uptrend is still in place since the correction in August this year halted above Rs 506, which is a key long-term support . As long as this level holds, the stock could move in a broad sideways range of Rs 500 and Rs 725 before breaking higher. Stop-loss for long-term investors can, therefore, be at Rs 500. Subsequent supports on the long-term chart are at Rs 442 and Rs 373.

The stock has already surpassed its short-term resistance at Rs 650. It can now proceed towards its long-term ceiling at Rs 724. But the stock is not likely to record a strong move above this long-term ceiling yet. Reversal from here can drag it lower to Rs 600 or Rs 500 again. Long-term target on break above Rs 720 is Rs 880.

Please provide the technical outlook for Reliance MediaWorks and Torrent Power.

Ajith Bokadia

Reliance MediaWorks (Rs 48): This stock has been in the throes of a bear market since the 2008 peak of Rs 1,750. The stock has seen its entire market-cap being eroded, as it is currently trading 98 per cent below this peak. Since investors ought to have exited aeons ago, it can only be of interest to traders now.

The stock is currently attempting to form a base around Rs 35. But the recovery from here is far from convincing. A volte face can take the stock again towards Rs 35. Long-term support on breach of this level exists at Rs 31 and then at Rs 27.9.

Medium-term targets are at Rs 61 and Rs 73. Investors with a short-term perspective should exit at either of these levels. Long-term view will turn conducive only on a close above Rs 93.

Torrent Power (Rs 98): This stock has witnessed a torrent of selling pressure since July 2010 that has dragged the stock down from Rs 374. The structural trend in the stock is weak. But it is attempting to stabilise above the key long-term support zone between Rs 50 and Rs 55. Investors still holding the stock can use this as a stop-loss. Resistances in the months ahead would be at Rs 120 and Rs 145.

Key long-term resistance is in the zone between Rs 180 and Rs 200. Investors wishing to buy the stock can wait for a firm close above Rs 200 before doing so.

I am holding 400 shares of Selan Exploration since 2009 at an average price of Rs 360 a share. Could you please suggest a strategy I should follow for this stock? Also please give your perspective on L&T Finance Holdings purchased at an average price of Rs 61.

Bineesh P.V.

Selan Exploration (Rs 305): Selan Exploration has managed to stay afloat in the last three years, even as the rest of the mid- and small-cap stocks were sinking. The structural trend in the stock continues to be up. It did challenge the key long-term support at Rs 220 in December 2011 and again in May 2013. But this level has not been firmly breached and can serve as a stop-loss for long-term investors in the stock.

Key medium-term resistance for the stock exists at Rs 350. Investors can book partial profits if the stock fails to surpass this level. Reversal from this level will result in the stock vacillating in the zone between Rs 220 and Rs 350 for a few more months.

Selan Exploration needs to record a strong move above Rs 350 to signal the intent of moving towards the long-term resistance around Rs 420.

L&T Finance Holdings (Rs 77): The vertical drop in L&T Finance Holdings in August dragged the stock below its key support level at Rs 62. But the stock has managed a smart reversal from Rs 53 and is once again trading above this support level. If your investment horizon is short-term, you can hold the stock with a stop-loss at Rs 72. Others can hold the stock with deeper stop-loss at Rs 62.

The stock has, however, reached a critical short-term resistance level around Rs 80. Despite it moving slightly above this level in the beginning of November, the stock has reversed below this level again. Short-term investors, still having some profit on the stock can take some money off the table.

The stock needs to record a sharp move above Rs 85 to move towards its previous life-time high at Rs 97.

I have shares of Himatsingka Seide purchased at an average price of Rs 45. Should I hold or exit from the stock?

Vineeta Varshney

Himatsingka Seide (Rs 44): This stock is moving in a narrow band between Rs 20 and Rs 50 since February 2011. The stock is currently approaching the upper end of this trading band. You can sell the stock if it fails to move above Rs 50 in the short-term. This will imply that the stock can reverse to Rs 31, Rs 26 or even Rs 23.

Conversely, a move beyond Rs 50 can take the stock further to Rs 64 or Rs 76.

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Published on November 09, 2013
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