The Hindu Business Line : Query corner

Gujarat NRE Coke (Rs 107.5): The outlook does not appear positive. The stock is in a corrective phase to the earlier rally. This correction does not appear complete.

The share price has already breached quite a few support levels and it appears to be headed towards Rs 94-96 range now. A drop below Rs 94 could lead to a fall to Rs 74-75 levels. Look for opportunities to sell while fresh exposures may be avoided. A close above Rs 117 would negate the bearish outlook.

I have a huge holding in UCO Bank and Tourism Finance Corporation (TFCI). What are prospects for these stocks and should I hold or exit? — Mohini Devi

UCO Bank (Rs 28.4): The banking sector stocks have lost steam in the recent weeks. The share price of quite a few banks has taken a pounding and UCO Bank is no exception. The recent downtrend does not appear complete. A close below Rs 26 would impart weakness and push the stock to Rs 21-22 range. Hold with a stop-loss at Rs 26 and reduce exposures on rally.

TFCI (Rs 16.9): The near-term outlook is weak and a drop to Rs 13-13.5 range appears likely. Look for opportunities to reduce exposures, as the stock is unlikely to get back to your entry price in the near-term. Fresh exposures may be considered when the stock closes above Rs 20.

What is your long-term view on Matrix Labs bought at Rs 168 and Kakatiya Cement at Rs 92? — Mahammed Sajid Maniyar

Matrix Labs (Rs 155): The stock could drop to Rs 140-142 range in the near-term. Investors unwilling to take risk may sell at least a portion of the holding at prevailing levels.

Evidence of support at around Rs 140-142 range may be used to take fresh exposures. At the moment, there is no compelling reason to stay invested. The trend would turn bullish on a close above Rs 174 and fresh exposures may be considered subsequently.

Kakatiya Cement (Rs 83.5): The share price appears to be headed towards Rs 72-74 levels. Hold with a stop-loss at Rs 80 and reduce exposures on strength. Only a close above Rs 91 would negate the bearish outlook. If the stop-loss gets triggered, fresh exposures may be considered on a subsequent close above Rs 91.

Kindly advice about my holdings in Sabero Organics bought at Rs 31.4. — Vikash Sharma

Sabero Organics (Rs 22.3): The near-term outlook is weak. The stock is likely to drop to Rs 17-18 range in the near-term. Remain invested with a stop-loss at Rs 21.5. The bearish outlook would be valid as long as the stock trades below the positive trigger level of Rs 25.

Sell a portion of the holdings at prevailing levels and hold the balance with a stop-loss at Rs 21.4.

I purchased Mahindra & Mahindra at Rs 500. Please let me know the prospects for the stock and whether I should hold or sell. — Mukund Joshi

Mahindra & Mahindra (Rs 443.5): The recent downward trend does not appear complete. The immediate resistance is at Rs 452-454 range. The stock is likely to reverse direction at this resistance zone and drop to the next support zone at Rs 405-410 range. Hold with a stop-loss at Rs 430 and use a trailing stop-loss if the stock moves up. The negative trend would be reversed if the stock closes above Rs 470. Investors with a high risk appetite could take short positions on the evidence of resistance at around Rs 453, with a stop-loss at Rs 464.

Please let me have your views on Suryalakshmi Cotton purchased at Rs 123. — Avninder.

Suryalakshmi Cotton (Rs 161.6): A test of the immediate support level at Rs 151-152 range appears likely. A drop below Rs 151 could push the stock to lower levels of Rs 135-138. Considering your entry level, it would be advisable to take partial profits and retain the balance with a stop-loss at Rs 150. Fresh buying may be considered on the evidence of support at around Rs 132-135 range, with a suitable stop-loss. Alternatively, a close above Rs 180 may also be used to take exposures with a close stop-loss in place.

Is it advisable to hold IPCL bought at Rs 212 and what is your view on Engineers India? — George Thomas

IPCL (Rs 162.): The share price is ruling close to the support level at Rs 156. A drop below Rs 156 would impart weakness and the stock could drop to Rs 140-143 range subsequently. Hold with a stop-loss at Rs 155.

Dilute exposures if the share price moves up. It does not appear likely that the stock would get back to your entry levels in the near-term. If the stop-loss is triggered, fresh exposures may be considered on a subsequent break above Rs 178.

Engineers India (Rs 388.1): The outlook for the stock is positive. The share price appears to be on the next leg of a upward move, after having completed the earlier correction. The positive view would be valid as long as the stock holds above Rs 320.

Long-term investors may buy the stock on declines, with a suitable stop-loss in place. The share price could head towards the immediate target zone of Rs 435-440 range.

I would like to know if it is advisable to buy MRPL at current price levels. Is there any upside potential for Visaka Industries bought at Rs 142? — Ranga

MRPL (Rs 46): There is no reason to buy the stock now. The stock is in a downtrend and there are no signs of the completion of this trend. Exposures in limited quantity may be considered on a close above Rs 48, with a close stop-loss in place. For the moment, it would be advisable to stay clear of the stock.

Visaka Industries (Rs 143.7): Sell at least a portion of the holdings now as you would have opportunities to re-enter at lower levels. The stock appears to be heading towards Rs 131-132 range. Buy on weakness as the stock is in a long-term uptrend. A close above Rs 154 would indicate the resumption of the upward move. Long positions may be considered with a suitable stop-loss when the stock closes above Rs 154.

What is your view on Moser Baer bought at Rs 290? — Vimal Bhatia

Moser Baer (Rs 215): The share price has declined below quite a few support levels. The trend is bearish and it would be advisable to reduce exposures. Have a stop-loss at Rs 209. There is no point holding this stock as it is unlikely to recover to the levels at which you have entered. It would be better to switch to a stock that is in a strong uptrend. Only a close above Rs 237 would negate the positive outlook.

Is the stop-loss mentioned by you relevant only for short-term investors? As the stop-loss price for quite a few stocks gets triggered in a bearish market, should it revised? — Uday Kulkarni

We normally provide two stop-loss levels — One is applicable for the investors who already have exposures in the stock and the other, for those would take fresh exposures.

More often than not, the stop-loss for existing holders would to be wider in relation to the levels mentioned for fresh exposures. Long-term investors may use this stop-loss as the stock would typically get into a corrective phase on the breach of this level. The only caveat is that investors should have a strategy to re-enter, when there are signs of trend reversal, after the stop-loss is taken out.

Regarding the second part of the question, the stop-loss level should be arrived at after considering various factors including the overall market sentiment. Once the stop-loss is finalised, it is not advisable to adjust it in accordance with the market sentiment.

A trading position should be initiated only after a carefully planned strategy regarding entry, exit and stop-loss levels. After taking a position, the exit should be in the form of either the stop-loss being hit or the target being achieved. Stop-loss may be revised after entering a trade if it ensures protection of unrealised gains or for reduces potential losses.

(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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