Your Stock Portfolio: Crompton Greaves on a revival mode

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

What is the best level to make a long-term entry into the stock of Crompton Greaves?

Iqbal Ahmed Khan

Crompton Greaves (₹58): After the sharp fall in January and February 2016, the stock price of Crompton Greaves found support at ₹40-42.

However, the stock changed direction, triggered by positive divergence in the daily relative strength index and began to trend upwards.

It took support in this band in mid-March and then started to move upwards. Since then, the stock has been on a short-term uptrend. While trending up, it emphatically breached a key long-term resistance at ₹53 in recent times. But,the stock has met with a resistance at ₹60 which is also its 200-day moving average.

A corrective decline is possible in the near term to ₹53 and then to ₹50. Investors with a long-term perspective can make use of the corrective declines to buy the stock, while maintaining a stop-loss at ₹42.

Strong breakthrough of resistance at ₹60 can take the stock northwards to ₹68-₹70 in the short to medium-term. Further breach of ₹70 can strengthen the uptrend and take the stock higher to ₹80 or even to ₹90 in the long run.

Conversely, a decisive downward break of the key support band between ₹40 and ₹42 will strengthen the bearish momentum and drag the stock down to ₹35 and ₹30 levels.

I bought stocks of Punjab National Bank and Bank of India at ₹120 and ₹150 respectively. What should I do?

Prashant Shah

Sai Naveen

Punjab National Bank (₹90): Both the long and medium-term trends are down for the stock of Punjab National Bank (PNB). Nevertheless, the stock price found support at around ₹70 in February and reversed direction.

This reversal is backed by positive divergence in the daily indicators. Since then, the stock has been on a nascent short-term uptrend.

Over the previous week, the stock surged 6.5 per cent, breaching its 21 as well as 50-day moving averages and a key immediate resistance at ₹88. Therefore, you can resort to rupee-cost averaging — by buying the stock from current levels and through its dips with a stop-loss at ₹77.

The stock can trend upwards and encounter resistance at ₹100. Conclusive breach of this level would pave way for a medium-term upward movement towards ₹110 and then to ₹130 levels. The stock may face difficulty in moving beyond ₹130 with significant long-term resistance at these levels.

Investors can consider taking profits at that juncture. Key resistances above ₹130 are pegged at ₹145 and ₹170 levels.

On the other hand, immediate supports to cushion the stock would be at ₹88 and ₹80 in the short term.

A slump below ₹80 can reinforce the downtrend and drag the stock down to ₹70 with the next support at ₹60.

Bank of India (₹97.5): The stock price of Bank of India is in a downtrend across time frames — short, medium and long-term. Recording a multi-year low at ₹80, the stock price found support and started to move upwards.

However, the crucial resistance at ₹100 is limiting the stock and its short-term trend continues to be down. Only a clear break through of the key resistances ahead at ₹100 and ₹115 will alter the short-term trend upwards. Then, the stock can rally to ₹130 or even to ₹150 in the medium term.

Hence, investors with a long-term perspective can buy the stock above ₹100 with a stop-loss at ₹80 and subsequently exit at ₹150 or ₹170 in the long run. In January 2015, the stock encountered a significant long-term resistance at around ₹300 and began to decline.

It has been on an intermediate-term downtrend since then. Only a decisive break out of the trend-deciding band between ₹190 and ₹200 will alter this downtrend and take the stock northwards to ₹225 or ₹260 where there is significant long-term resistance. Supports below ₹80 would be at ₹70 and ₹65.

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