Technical Analysis

Your stock portfolio

Yoganand D | Updated on March 02, 2014 Published on March 02, 2014

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Kindly share the medium and long-term prospects of Multi Commodity Exchange of India (MCX) purchased at ₹882 and Gitanjali Gems purchased at ₹205. Can I average by purchasing more?

Rajiv

MCX (₹525.1): Following a steep fall in early August 2013, MCX found support at ₹240 and started to trend northwards. Since early January 2014, the stock has been on a short-term sideways consolidation mode, in the band between ₹560 and ₹600. A decisive break above ₹600 can take the stock to ₹700 and then to ₹830. The stock has significant long-term resistance in the band between ₹830 and ₹850.

A breakout of this resistance zone will pave way for a rally to ₹940 or even to ₹1,100 in the long term. But failure to move above this resistance will be cue for exiting the stock. You can consider holding the stock as long as it trades above its key long-term support band between ₹380 and ₹400, with a stop-loss at ₹380. An emphatic fall below this support will drag the stock down to ₹240 in the medium to long term. Immediate support levels are pegged at ₹500 and ₹450.

Gitanjali Gems (₹62.2): The stock took support at ₹56 in early August 2013, after hitting lower circuits for over a month. Since then, it has been on a broad sideways consolidation phase between ₹50 and ₹80. A conclusive breakthrough of ₹80 can take the stock higher to ₹100 and then to ₹140. Envisaging a move above ₹140 is difficult. Averaging the stock can be risky; instead consider exiting it in rallies. Tumble below the stock’s immediate support at ₹60 can pull it lower to ₹50, the lower boundary of the sideways range. The stock will fall into a bear's grip if it declines below ₹50 and can witness a fall to ₹33 in the long term.

Please suggest if I can invest in United bank of India (UBI) at current levels or wait for further declines.

Tapas Sarkar

United Bank of India (₹25): The stock has been in a long-term downtrend, since its November 2010 high of ₹152. The medium as well as short-term trends are also down for the stock. In early February 2014, the stock decisively breached its key support at ₹28 and registered a new low at ₹23 recently. Moreover, the stock is still not out of woods, and there are no signs of reversal.

Hence, buying the stock at this juncture is not advisable. Wait for a clear breakout of its key resistance at ₹35 for a target of ₹47.

A strong close above ₹47 is needed to alter the medium-term trend and take the stock northwards to ₹55. Nevertheless, a failure to move above ₹35 will jail the stock in the wide range of ₹23 and ₹35. Immediate resistance points are at ₹28, ₹32 and ₹35.

I bought Reliance Communications at ₹145 last year. Please advise.

VK Divya

Reliance Communications (₹112): The stock's strong uptrend since the March 2013 low at ₹50, encountered significant long-term resistance in the zone between ₹150 and ₹160 in September and October 2013. Subsequently, the stock altered its trend and has been on an intermediate-term downtrend. Even short-term trend for the stock is down.

After retracing 50 per cent fibonacci retracement level of its prior uptrend, the stock is hovering and testing a key support level at ₹106.

A strong decline below this support will pull the stock down to ₹90 and then to ₹80 in the short term. If these two supports fail to provide base for the stock, it can decline to ₹70 in the medium-term.

On the upside, the stock has significant resistance at ₹127. A strong move beyond this level is needed to alter the short-term downtrend and take the stock to ₹140. Important resistancelevels above ₹140 are positioned at ₹150 and ₹160.

Please give your medium and long-term outlook for Union Bank .

Eldho Mathew

Union Bank of India (₹103): From October 2010 peak of ₹426, Union Bank of India has been in a long-term downtrend. Both medium and short-term trends are also down for the stock. Last July, the stock decisively broke its long-term support at ₹155 and extended its downfall.

However, it found support at its next key long-term support at ₹100 in August 2013. The stock is once again nearing this support and testing it.

An upward reversal from this buttress can take the stock higher to ₹120 initially and then to ₹140 in the medium-term.

But, a conclusive fall below this key long-term support will reinforce the bearish momentum and drag the stock down to ₹80. Important supports below this level are at ₹70 and ₹57.

Published on March 02, 2014
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