Your Stock Portfolio. Vedanta poised at a key hurdle

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

I have shares of Vedanta bought at an average price of ₹267 and Tech Mahindra at ₹667. Kindly advise.

R C Bhatia

Raajesh Reddy

Vedanta (₹94): After registering a 52-week low at ₹58.1 in early February , the stock of Vedanta reversed direction and has been on a nascent uptrend. While trending up, the stock has decisively breached key resistances at ₹75 and ₹85.

It hovers well above its 21 and 50-day moving averages. However, the stock now faces a key psychological resistance as well as 200-day moving average ahead at ₹100. A conclusive breakout of this resistance can strengthen the uptrend and take the stock higher to ₹110 and ₹120. You can consider averaging the stock at current levels with a stop-loss at ₹70.

Further rally above ₹120 can take the stock northwards to ₹135 and ₹150 in the medium term. On the other hand, a decisive fall below the key support level of ₹75 can pull the stock down once again to ₹60. Immediate support is at ₹85.

Moreover, the price action since December 2015 appears to be formation of an inverse head and shoulders pattern with neckline at ₹94 which is a bullish reversal pattern.

Conclusive breakout of this pattern will give a price target of approximately ₹130. Further rally can push the stock higher to ₹160-170 in the long run. Investors can consider exiting the stock either at ₹130 or ₹160.

Tech Mahindra (₹470.7): The intermediate-term downtrend that commenced from the February 2015 peak of ₹749, found support around ₹415 in February this year.

The stock reversed direction triggered by positive divergence in the daily indicators. The stock faces a crucial resistance in the band between ₹495 and ₹505. A decisive breakthrough of this band can take the stock higher to ₹550 or ₹575 levels in the medium term.

Having said that, failure to do so can drag the stock down to ₹450 or even to ₹415.

To alter the downtrend, the stock needs to conclusive breach the significant long-term resistance at ₹575 which also coincides with the 50 per cent fibonacci retracement level of the intermediate-term downtrend.

Then, the stock can trend upwards to ₹630 and ₹680 level in the long term. Investors with a long-term perspective can buy above ₹505 while maintaining a stop-loss at ₹440.

Consider exiting the stock either at ₹575 or ₹630. Conversely, a slump below the significant medium-term base level of ₹415 can pull the stock down to ₹370 and ₹350 levels.

I hold some shares of Castrol bought at ₹390. Should I sell or average at lower levels?

Sudhin B

Castrol India (₹380.4): Following a decisive breakthrough of the key support at around ₹420 in early February, the stock of Castrol fell to its significant long-term support at ₹365. Since then, this level has been providing cushion for the stock. There is an increase in volume over the past month. Investors should tread with caution as long as the stock moves above the key base level of ₹365. Strong rally in the coming week could attract buying interest and take it higher to ₹420 in the medium term. Investors with a high-risk appetite can consider buying with a stop-loss at ₹365.

A tumble below ₹365, though, can strengthen the downtrend; one can exit the stock in such a scenario. The stock can decline to ₹335 and then to ₹315 in the medium to long run. Only an emphatic breakthrough of crucial resistances at ₹420 and ₹450 will alter the downtrend and take the stock upwards to ₹475 and ₹500 levels.

Send your queries to techtrail@thehindu.co.in

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