Trim exposures in SmithKline Health

B. Krishnakumar

THE market movement in the last five trading days has been marked by a relatively flat and lacklustre trend.

The market is still groping for direction, with a conclusive break-out proving to be elusive. Given the fact that the market was confined to a very narrow range last week, the outlook for the ensuing week continues to remain hazy.

On the upside, the Sensex now faces resistance at 4250-4300 range. A decisive break past this level would be a basic prerequisite for resumption of a short-term uptrend. On the downside, the first support level is at around the 4090-mark.

At the present point in time, chances are even for a break-out on either side. As mentioned last week, the Sensex still has the potential to move to the 5000-point mark, which, however, would be either validated or negated by the price action in the ensuing weeks.

Given the current market scenario, it would be safer to refrain from initiating fresh positions in key index stocks. Fresh positions may be contemplated on the evidence of a break-out either on the up or downside. Existing investors could use intermittent price rallies to cut exposures in index stocks and software stocks.

The focus this week is on Hindalco Industries and SmithKline Beecham Healthcare.

The share price of Hindalco Industries has been confined to a narrow band in the recent weeks.

Going by recent price pattern, the stock is likely to see a downside break-out shortly. Existing holders could remain invested and use price upmoves to cut exposures. Aggressive traders could contemplate short positions with a tight stop-loss once the stock declines below Rs. 790 level.

The SmithKline Beecham Healthcare stock has seen a sharp run-up in value in the recent times. The stock appears to have met with some resistance at the Rs. 525 level. Existing holders could use price rallies to trim exposure. Fresh exposures may be contemplated on evidence of support in the Rs. 420-430 range.

Recommendation follow-up

The expectation of an uptrend in Zee Telefilms was negated by the drop in share price below the Rs. 396-mark mentioned last week. The decline below this level would have resulted in the initiation of short positions in the scrip. The trend in the stock has now turned weak and existing holders of short positions could place stop-loss at around the Rs. 425-mark. Short positions could be enhanced (with very close stop-loss) if the stock declines below Rs. 377.

The Himachal Futuristic scrip failed to move past the resistance level of Rs. 1,550 mentioned last week. The sharp decline on Friday has imparted short-term weakness in the stock. A decline below Rs. 1,210 level could be used to initiate short positions in the stock. A move past Rs. 1,365 would trigger positive sentiment in the stock. Given the highly speculative nature of the stock, open short or long positions would require very close stop loss.

(Note: Recommendations in this column are based entirely on technical analysis of the past price behaviour of the scrip concerned. There is a risk of loss in trading.)