Technical Analysis

Query Corner - Educomp in intermediate-term decline

Lokeshwarri S.K. | Updated on August 13, 2011 Published on August 06, 2011









What are the prospects of Indian Hotels from a long-term perspective?

N. Pandu Ranga Rao

Indian Hotels Company (Rs 76.2): The long-term trend in Indian Hotels continues to be down since the stock has reversed lower from the key resistance at Rs 118. Long-term trend in the stock will turn higher only on a close above this level, subsequently paving the way for rally to Rs 140 or Rs 163.

But the stock is in a medium-term downtrend since last May. If this decline extends beyond Rs 66, then the long-term view will deteriorate significantly. This level (Rs 66) should, therefore, be the stop-loss for long-term investors. Subsequent downside targets are Rs 56 and Rs 34.

Short-term trend is also currently down in Indian Hotels. But the stock has strong support at Rs 66 from where a rebound is likely. Investors with short-term perspective can, therefore, accumulate the stock around Rs 66 with stop at Rs 60. The stock can bounce to Rs 91, Rs 102 or Rs 118 in the months ahead.

Please give the short- and long-term prospects of Educomp Solutions.

T. Jayakumar

Educomp Solutions (Rs 301.8): Educomp Solutions is in a vicious downtrend since last October and the stock is spiralling lower crashing through one support after another. Next long-term support for the stock is the February 2009 low of Rs 266.

Investors still holding the stock can hang on as long as it trades above this level.

However, breach of this level can cause a sharp slide to Rs 215 or Rs 166. Investors are therefore advised to divest their holding in this stock on break below Rs 266.

The downward sloping trend-line at Rs 436 will be the key resistance that will signal the reversal in the short-term outlook.

Investors wishing to buy the stock can wait for close above this line before doing so. Other resistances for the months ahead will be at Rs 500 and Rs 589.

Please give the outlook on Kiri Industries bought at Rs 620 and Shiv-Vani Oil and Gas Exploration Services bought at Rs 425.


Kiri Industries (Rs 161.3): Kiri Industries is also struggling in the bear's grip making the stock hit record lows every other day. Chart pattern in weekly chart suggests that the stock could be heading towards the December 2008 trough at Rs 65. The long-, medium- as well as the short-term trends in the stock are currently down and all the oscillators are also pointing lower.

It will be best to switch out of this stock at current juncture. The outlook for the stock will improve only if it goes on to close above Rs 350. Fresh investment in this counter is, therefore, recommended only on close above this level. Subsequent targets are Rs 440 and Rs 520.

Shiv-Vani Oil and Gas Exploration Services (Rs 186): This stock reversed lower from significant long-term resistance at Rs 500 after making a double top in April and July 2010. It has been sliding incessantly ever since. It also breached the key medium-term support at Rs 250 in June.

Next support for this stock is quite a way off at the March 2009 low at Rs 88. Investors holding the stock can consider divesting the stock and reinvesting once it records a close above Rs 250. Key resistances for the months ahead would be at Rs 310 and Rs 380.

I am holding shares of Nitesh Estates bought at Rs 23. Please give the outlook for these stocks.

Jose Ouseph

Nitesh Estates (Rs 20.4): This stock is also down in the dumps, currently near its life-time low. Immediate support for the stock is the trough of Rs 19.6 recorded in February this year. Investors should divest the stock if it slides below this level since it is hard to judge where the next halt can be.

Short-term resistances are at Rs 25 and Rs 27 while the medium-term view will turn positive only on a close above Rs 32.

I want to buy Sterlite Technologies and Gulf Oil. Kindly let me know the correct level to enter these stocks.

Rakesh Khurana

Sterlite Technologies (Rs 47.7): Sterlite Technologies is recommended mainly for investors with greater penchant for risk since this is a high beta stock that declines more than its peers in market crashes. It has key medium-term support in the band between Rs 45 and Rs 50 where it is currently halting.

Investors can, therefore, accumulate the stock in this band with stop at Rs 45. The outlook will deteriorate considerably only on a decline below Rs 45, dragging the stock lower to Rs 32, Rs 27 or even to sub-Rs 10 level in the months ahead.

However, if the stock manages to hold above Rs 45, it can move higher to Rs 76, Rs 85 or Rs 94 where investors with shorter investment horizon can book profit. It is hard to envisage a move above Rs 94 in the next 12 months.

Gulf Oil Corporation (Rs 86): The medium-term uptrend that began from March 2009 low continues to be in force in Gulf Oil. The stock reversed above its key medium-term support at Rs 68 in March and is currently in a short-term uptrend.

Investors with short-term perspective can buy the stock in declines with stop at Rs 80. The stock can move higher to Rs 116 or Rs 145 in the medium-term.

That said, long-term outlook for the stock will turn positive only on move above Rs 166. Subsequent long-term targets are Rs 212 and Rs 258.

Please advise on SREI Infrastructure Finance bought at Rs 54.

Y. Vijayakulam

SREI Infrastructure Finance (Rs 43.1): SREI Infrastructure Finance is in a medium-term decline since the peak of Rs 79 recorded in November last year.

This decline is, however, halting at the stock's critical medium-term support band between Rs 33 and Rs 37.

Medium-term targets for the stock are Rs 62 and Rs 78. These targets are, however, achievable only if the stock holds above Rs 33. Decline below this level will pull the stock down to Rs 25 or even below over the upcoming months.

The long-term outlook will turn positive only if the stock closes above Rs 78. Subsequent targets are Rs 88 and Rs 106.

I have bought Bank of India at Rs 494. Please advise about the stock's prospects for the next one year.

V. Venkatraman

Bank of India (Rs 362.2): Bank of India is one of the stocks that have corrected sharply since last October's peak of Rs 586. The stock is down 38 per cent from this level. Investors can, however, draw solace from the fact that the stock is nearing its key long-term support at Rs 336.

The zone between Rs 300 and Rs 330 should be able to cushion the current decline in the stock.

So, long-term investors can hold the stock with stop at Rs 300. Decline to the above mentioned band can also provide buying opportunity to investors with the same stop.

It would, however, be difficult for the stock to move on to a new high over the next one year. Rallies will face resistance at Rs 450 and Rs 500. Investors with shorter investment horizon can divest their holding at either of these levels.

(Readers can send in their queries, on not more than two companies, to > Queries can also be sent by post to: Tech Trail, 859/860 Kasturi Buildings, Anna Salai, Chennai 600002. We would endeavour to answer as many queries as possible. However, constraints of space will limit the responses featured under this column.)

Published on August 06, 2011

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