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B. Krishnakumar

Should I hold or sell my holding in FDC bought at an average rate of Rs 60? — K. Srinivas

FDC (Rs 51.3): The recent upward move appears to have been completed a couple of weeks ago when the stock touched a high of Rs 65.

The subsequent correction from this high does not appear complete. The stock is likely to seek lower levels. The immediate support is placed at Rs 48-Rs 49 range. A drop below Rs 45 would push the stock to Rs 30-Rs 32 range. Hold with a stop-loss at Rs 45 and use a trailing stop-loss in the event of a price rally. A move above Rs 63 would negate the weak outlook and would help the stock move to higher levels.

I bought State Bank of India at Rs 525 and HDFC Bank at Rs 400. I am willing to hold these stocks for another year provided the outlook is bullish. What is your advice? — A.V. Ramakrishna

State Bank of India (Rs 576.4): Taking into account your entry price and the long-term bullish trend, it would be advisable to remain invested. The stock is likely to complete the present downward trend shortly. The long-term upward trend would resume on the completion of this corrective phase. Hold with a stop-loss at Rs 530. The stock is likely to recover ground and move to Rs 675-Rs 700 mark. The long-term positive view is subject to the stock price holding above Rs 510. A drop below Rs 510 would delay the process of the recovery to Rs 675-Rs 700 range.

HDFC Bank (Rs 509.6): The outlook is bullish and the stock could move to Rs 560-Rs 570 range in the near-term. The positive view would be negated if the stock slips to lower than Rs 470. Hold with a stop-loss at Rs 470 and use price rally to Rs 580-Rs 600 range to reduce exposures. Investors with a high-risk profile may consider long positions on a move above Rs 530, with a stop-loss at Rs 490.

What is the outlook for L&T and Chambal Fertiliser bought at Rs 965 and Rs 27 respectively? — Elango

L&T (Rs 951): The stock is ruling close to the support level of Rs 900-Rs 910 range. A drop below this level would result in the completion of a bearish "head and shoulder" pattern. On completion of this pattern, the stock might push the share price to Rs 785-Rs 790 range. Hold with a stop-loss at Rs 900. Investors uncomfortable with such a wide stop-loss may place it at Rs 930. The risk, however, is that there is a possibility of the stock hitting the stop-loss at Rs 930 and resuming the upward move subsequently. To that extent, the stop-loss at Rs 930 is relatively more risky.

Chambal Fertiliser (Rs 27): A drop below Rs 24 would point to further weakness. A move above Rs 30 would impart strength and may push the stock to Rs 35-Rs 36 range. Remain invested with a stop-loss at Rs 24 and take partial profits at Rs 35-Rs 36 range.

Kindly advice whether to hold or exit ICICI Bank bought at Rs 370 and NRC at Rs 36. — Haresh Narayan Jaguja

ICICI Bank (Rs 350.6): Sell a portion of your holdings, as the outlook appears weak. The stock could drop to Rs 300-Rs 305 range. A drop below Rs 340 would impart weakness. Hold with a stop-loss at Rs 340 for a portion of the holding and sell the rest. A close above Rs 365 would impart strength. If the stop-loss gets triggered, fresh buying may be considered on a subsequent move past Rs 365, with a close stop-loss in place.

NRC (Rs 27.3): It would take some time for the stock to move up and reach to your purchase price. There are no signs of recovery as yet. Hold with a stop-loss at Rs .24 and use price recovery to reduce holdings.

Shall I buy Bajaj Hindustan? — Sanjay

Bajaj Hindustan (Rs 149.8): The outlook is positive and a move to Rs 165-Rs 170 range appears likely. Long positions may be considered at prevailing levels with a stop-loss at Rs 133. A close below Rs 133 would require dilution of holdings. Long positions may be enhanced if the share price moves above Rs 155, with a close stop-loss in place.

What is outlook for Cipla bought at Rs 303? — Sharadha

Cipla (Rs 271.2): Clarity on the near-term outlook may emerge over the next few days. A move past Rs 285 would have positive implications while a drop below Rs 245 would have negative implications. Hold with a stop-loss at Rs 245 for a portion of the holding and at Rs 258 for the rest. A trailing stop loss may be used in the event of a run-up in the price. There is a possibility of the stock dropping to Rs 195-Rs 200 range. This view would be confirmed if the stock drops below Rs 245.

I bought Biocon at Rs 640 and Indraprastha Gas at Rs 120. What is the outlook for these stocks? — N. Sivasubramanian

Biocon (Rs 466.3): We are not in a position to arrive at a technical view due to inadequate historical price data. We wish to emphasise that unless there is at least two years of price history, it would be difficult to arrive at a judgment about the trends likely over the medium-term as well as long-term. This aspect could also affect the quality of calling the short-term trend. The recent trends in this stock also do not provide any clue about the short-term price movement.

Indraprastha Gas (Rs 95.5): In this case too, there is inadequate price history. The recent price action however suggests that the stock could seek higher levels of Rs 115-Rs 120. The stop-loss for existing positions may be placed at Rs 88.

I am having holding in CESC. Based on my analysis, I expect the price to touch Rs 200 in the near future. Is my assessment right? — N.S. Srinivasan

CESC (Rs 155.8): The long-term trend is bullish. The stock could move to your expected price of Rs 200. The time-frame within which this price target would be reached cannot however be assessed. The risk is that the stock could drop to Rs 125-Rs 130 levels if it declines below Rs 145. The drop to Rs 125-Rs 130 would not, however, negate the view of a rally to Rs 200. Shareholders may remain invested with a stop-loss at Rs 125.

I need clarification regarding the recommendation published in your column. In the case of Aurobindo Pharma for instance, you had advised to buy on a move past Rs 330. The stop-loss level mentioned was Rs 295 for shareholders. Buying on a break above Rs 330, carries a notional risk of Rs 25 per share based on the stop loss of Rs 305 mentioned for fresh buying. The stock breached the stop-loss levels last week and dropped sharply subsequently. Given your view that the stock would move to Rs 440 after completing the downward move, will it not be advisable for an investor to buy the stock at prevailing levels as the price has dropped sharply? — R.M. Murthy

There two aspects to stock picking and trading based on technical analysis. The first aspect involves identifying stocks that are in a trending phase and having upside potential. The other crucial aspect is determining the specific entry, exit and stop-loss levels. Both these aspects are important though the quantum of money earned would be more a function of the second aspect of entry and exit.

When we arrive at entry triggers, we normally expect the stock to get into a strong trending mode on the break of the trigger level. On the break of the positive trigger level, we do not expect the stock to reverse immediately and drop below the stop-loss level.

While fixing stop loss, we consciously try to arrive at levels that do not get breached easily. If the stop-loss is breached, the recommended view gets negated and the stock moves gets into a trending phase in the opposite direction.

In the case of Aurobindo Pharma, we had mentioned an entry trigger of Rs 330 and stop-loss of Rs 295. The stock did not have the strength to move past the "buy" trigger level, but it dropped below the stop-loss level. This is sign of weakness and the stock witnessed a sharp downward move subsequently.

Though we continue to maintain that the stock would rise to the Rs 440 level, it does not mean that the investors should buy the stock just because it has dropped sharply. There should be a basis for all investment decisions. Investors need to look for a fresh "buy" signal before committing funds. There is no point buying the stock just because it has dropped sharply and appears relatively more attractive than at higher levels that prevailed earlier.

Readers can send in their queries, on not more than two companies, to techtrail@thehindu.co.in

Queries can also be sent by post to:

Tech Trail, 859/860 Kasturi Buildings, Anna Salai, Chennai 600002.

We would endeavour to answer as many queries as possible. However, constraints of space will limit the responses featured under this column.

(Note: The analysis and opinion expressed in these columns are based on the technical analysis of the past price behaviour. Opinion and price targets are based on the Elliott Wave Analysis. The stop-loss level provided with the recommendation is important. The original view would stand negated if the stop loss level is breached. There is a risk of loss in trading)

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