Your Stock Portfolio. Coal India is turning hot

Here are answers to readers’ queries on the performance of their stock holdings.

I bought sharers of REC at ₹200. It now trades close to ₹160-165. Also, I have shares of Coal India at ₹307. What can I do?

Nagesh Samant

  Rural Electrification Corporation (₹163.4): The stock has been on a long-term downtrend since encountering a significant resistance in the band between ₹370 and ₹380 in March 2015.

Nevertheless, it found support at its long-term base in February 2016 and bounced up. This up-move lost strength after encountering resistance at ₹185 in April and declined to ₹150 levels once again. The stock had reversed higher from ₹150 in 2012 and 2013, in which the up-move was very strong and swift.

 But this time, the upward reversal is shallow and the stock is struggling to move past ₹185 conclusively. So, there is more possibility of breaking the key support downwards.

In that case, the primary downtrend will strengthen and the stock can decline to ₹125 or even ₹100 in the medium-to-intermediate term. Hence, you can exit the stock on a decisive fall below ₹150 and re-enter at lower levels. But a conclusive rally above ₹185 can take the stock higher to ₹200 and ₹225 levels. The stock needs to decisively break through the vital trend-deciding level at ₹265 to alter the long-term downtrend and take it higher to ₹300 and ₹320. Alternatively, you can consider averaging the stock on a rally above ₹185 with a stop-loss at ₹150.

Coal India (₹313.3): Registering an all-time high at ₹447 in August 2015, the stock of Coal India changed direction. It plunged sharply, breaking key supports at ₹400 and ₹370 and continued to decline.

Since the August peak, the stock has been on an intermediate-term downtrend. In April 2016, it found support at ₹272 and reversed direction, triggered by positive divergence in the daily indicators. The stock has been on a short-term uptrend since then.

During the first week of June, it jumped almost 10 per cent breaking through a key resistance at ₹300. It trades well above its 21 and 50-day moving averages. Last week, the stock advanced 2 per cent, reinforcing the bullish momentum.

 However, it currently tests a key resistance at ₹315 as well as the 200-day moving average. A decisive break out of this resistance can pave way for an up-move to ₹340 in the short term. You can consider holding the stock and averaging on declines with a stop-loss at ₹280.

An emphatic breakthrough of the significant long-term barrier at ₹340 is needed to further strengthen the stock. It can then target ₹360 and ₹370 levels in the long term.

The intermediate-term downtrend will be altered on a rally beyond ₹370. In that scenario, the stock can trend northwards to ₹400. Conversely, a fall below the immediate support at ₹300 can pull the stock down to ₹280 and ₹272 levels. Next support in the band is between the levels of ₹240 and ₹250.

What are the prospects for IFCI?

Muthu S

IFCI (₹25.7): Taking strength from the long-term support band between ₹18 and ₹20 this February, the stock of IFCI began trending upwards. Since then, it has been on a medium-term uptrend. The short-term trend is also looking up. However, the stock tests a key resistance at ₹26.5. A conclusive move beyond this level can take the stock higher to ₹28.5 and ₹30 in the medium term.

Further rally beyond ₹30 will pave way for an up-move to ₹33 and ₹38. Breakthrough of the resistance band between ₹40 and ₹42 is required to strengthen the uptrend and take the stock northwards to ₹50 in the long run. A slump below ₹23 can drag the stock once again to ₹20.

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