Tech Query: Can the downtrend in L&T Infotech reverse higher?

I hold 50 shares of Larsen & Toubro Infotech. My average buy price is ₹6,000. What is the short-term and long-term outlook for this stock?

Grandhi Suresh

Larsen & Toubro Infotech (₹4,504.65): The stock has been in a strong downtrend since the beginning of this year. However, the price action since mid-May indicates a sideways consolidation within the broad downtrend. Importantly, this consolidation is happening above the 61.8 per cent Fibonacci retracement support level of ₹3,646. So, chances are high that this consolidation could be a base formation before a fresh rally begins. For the short-term, ₹4,900-4,950 and ₹5,155 are the important resistances. Supports are at ₹3,750 and then at ₹3,646.

A prolonged sideways consolidation between ₹3,750 and ₹4,950 or ₹3,646 and ₹5,150 cannot be ruled out in the short term. However, from a big-picture perspective, we consider this as a base formation. We place a higher probability for the stock to break above ₹5,150 eventually and rise towards ₹6,500-7,000 over the long term. If you have the capacity and the intent to hold the stock for the long term, accumulate this stock at current levels. Keep a stop-loss at ₹3,430. Move the stop-loss up to ₹4,930 as soon as the stock moves up to ₹5,350. Revise the stop-loss further up to ₹5,450, when the stock touches ₹6,050 on the upside. Exit 50 per cent of your holding at ₹6,500 and the rest at ₹7,000.

I have bought shares of Apollo Hospitals Enterprise at ₹3,900. Please provide me the long-term outlook for this stock.

S Sankaran

Apollo Hospitals Enterprise (₹4,124.55): You will have to book profit and exit this stock at the current levels. The trend is down since December last year. Importantly, this downtrend has happened after a strong head-and-shoulder-pattern formation. This is a bearish pattern. So, the bounce from the recent low of ₹3,365 made in May is just a corrective rally within the broader downtrend. Immediate resistance is at ₹4,180 and then a strong trend resistance is at ₹4,225. The downtrend is likely to resume either from here itself or after testing ₹4,225.

That fresh leg of fall will have the potential to target ₹3,100-3,000 on the downside. The level of ₹3,000 is a strong trend support which can halt the fall and trigger a reversal. In a worst-case scenario, if the stock breaks below ₹3,000 as well, then a steeper fall to ₹2,600-2,500 is possible.

What is the long-term outlook for Procter & Gamble Health? I have bought shares at ₹4,400.

Ravi Shankar

Procter & Gamble Health (₹4,420.8): The stock has been in a strong downtrend since February last year. Within this downtrend, it has been consolidating sideways for some time now. The consolidation range has been ₹3,900-4,650 since March this year. The region between ₹4,750 and ₹4,850 is a crucial resistance. The stock has to rise past ₹4,850 decisively in order to indicate a trend reversal. Only in that case, a fresh rise to ₹5,400 and ₹5,750 can be seen. But, as long as the stock remains below ₹4,650 or ₹4,850, the broader trend will continue to remain down. That will keep the chances of the stock breaking the current range below ₹3,900 high.

Such a break can drag the stock down to ₹3,000 in the coming months. Looking at the chart, the bias remains negative. We prefer the stock to see one more leg of fall targeting ₹3,000. Thereafter, a trend reversal may happen. So, it is better to exit the stock at current levels. You may consider buying the stock again at ₹3,100.

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