What is the outlook for the stock of Ramco Systems? I bought this stock in 2021 at ₹510. Should I average at this level?
Ramco Systems (₹214.60): The trend is down. There is more room to fall further from current levels. Historical price movement indicates that every time the stock peaks, it has retraced the entire movement thereafter. So, going by the history, it looks like Ramco Systems’ share price can fall to ₹70 from here. Immediate resistance is at ₹227. Above that ₹267 and ₹300 are the next strong resistances. To become convincingly bullish again, the stock has to rise past ₹300 decisively. But that doesn’t look likely. So, we suggest you exit this stock with a loss at current levels.
It is hard to come out of stocks with a loss. But the pain of accepting the loss will keep us alert next time. It will also help in developing self-discipline which is very important for anyone to be successful in the markets. As a general rule, have a complete strategy in place when you take positions. By strategy, I mean deciding the exit and stop-loss levels at the first point itself. Execute the strategy as and when the price level comes up. Adhering to the stop-loss is all the more important rather than having it in mind. Also, don’t become greedy if your exit level comes much quicker than anticipated.
What is the outlook for the stock of Andhra Petrochemicals? I have bought the shares at ₹159.
Ranganatha N, Bengaluru
Andhra Petrochemicals (₹62.93): It looks like you have bought this stock near the peak. The stock spiked to ₹197.40 in August 2021 and has tumbled from there. The trend is down and strong. Although there has been a strong bounce last week, it is more likely to be a corrective rally. So, it may not sustain. Also, there is a strong resistance at ₹75. A strong break above ₹75 will be needed to ease the downside pressure. Such a break can take Andhra Petrochemicals’ share price up to ₹95. However, for the downtrend to reverse and the outlook to become bullish, a decisive monthly close above ₹95 is needed.
There is no sign of that happening in the near future. Indeed, a break above ₹75 itself may not happen now. So, we expect the Andhra Petrochemicals’ stock price to reverse lower from around ₹75 and fall to ₹40-35. In a worst-case scenario, the price can even tumble up to ₹20. So, it is better to exit this stock at current levels. We suggest you follow the advice given in the previous question on having proper strategy while taking a position.
I have bought shares of CG Power and Industrial Solutions. My purchase price is ₹290. What is the long-term outlook?
CG Power and Industrial Solutions (₹290.65): This stock has surged from a low of around ₹4.69 in March 2020 to ₹290.65 now. A high of ₹338.50 was made in February this year. You have entered this stock near the current top now. So, firstly you have to be very cautious. Because in stocks that have seen a surge like this, there is always a danger of falling back at the same pace. On the charts, there are supports at ₹260 and ₹240. Since you are a long-term investor, you can consider buying more at ₹265 and ₹245. But make sure that you have a stop-loss at ₹225.
In case the stock price falls below ₹240, it will indicate a trend reversal. In such a scenario, the stock price will come under pressure for a fall to ₹210-200 and even ₹170. So, you have to exit this stock at the above-mentioned stop-loss level. On the other hand, a bounce back from ₹265 or ₹245 will keep the overall uptrend intact. In that case, the stock will have potential to target ₹450 over the next year or two. Revise the stop-loss up to ₹295 when the price touches ₹335. Move the stop-loss further up to ₹340 when the price rises to ₹370. Exit the shares at ₹430.
Send your questions to email@example.com.