The Hindu Business Line : Query corner

MIRC Electronics (Rs 22.6): The price movement has been devoid of any trend as the stock has been moving in a sideways mode in the recent months. There are no signs of the stock getting into a trending mode either. It would, therefore, be advisable to exit at prevailing levels and switch to a stock that is in a trending mode. Investors who have entered at lower levels may hold with a stop-loss at Rs 19.

Ind-Swift Labs (Rs 150): The stock sought support at the crucial support level at Rs 135-138. There is a strong case for holding this stock as long as it holds above the Rs 130 level. The recent price patterns indicate that the stock could move to Rs 170-175 in the near-term. A close above Rs 175 could push the stock to Rs 210-215. Hold with a stop-loss at Rs 130.

Fresh exposures may also be considered at prevailing levels and on declines, with a stop-loss at Rs 130.

Could you tell me how the outlook is for Sintex Industries and Dalmia Cements at current market levels? — Ghevarghese Daniel

Sintex Industries (Rs 183): The share price is in a major uptrend and there appears to be upside potential from prevailing levels.

A move to Rs 210-215 appears likely in the near-term. This view would be valid as long as the stock holds above Rs 160. Stop-loss for long positions may be placed at Rs 160. Fresh exposures may be avoided for the moment.

Dalmia Cements (Rs 193): After a short-term drop to Rs 175-180, the stock is likely to resume the upward journey. A move to the target zone of Rs 215-220 appears likely. This view would be in currency as long as the price trades above the stop-loss of Rs 160. Remain invested with a stop-loss at Rs 160. Price weakness may be used to enhance exposures, with the same stop-loss.

What is the outlook for Ankur Drugs bought at Rs 118.5? Is it advisable to enter FCS Software at these levels? — T.R. Harsha

Ankur Drugs (Rs 147): The stock is in a major uptrend that is not complete as yet. A move to Rs 185-190 appears likely. Taking into account your entry price and positive long-term outlook, it would be advisable to stay invested with a stop-loss at Rs 130. Long positions may also be considered afresh on declines, with a stop-loss at Rs 130. Investors may book profits for a portion of their holding on the evidence of resistance at Rs 185-190.

FCS Software (Rs 106): The historical data is insufficient to arrive at a long-term outlook for the company. It is better to take exposures based on fundamental research in such cases.

Even in this bullish market, Arvind Mills is lagging behind. Will be worthwhile to hold the stock? — Sudhakaran Kannur

Arvind Mills (Rs 112): The stock appears to heading towards higher levels in the near-term. A move towards Rs 135-140 appears likely. Having held on to the stock during the past few months when the market has been bullish, there is no point selling it now. Remain invested with a stop-loss at Rs 100.

Fresh exposures may be considered by short-term traders with a stop-loss at Rs 105.

What is the outlook for VSNL bought Rs 415? — R. Prabhakaran

VSNL (Rs 414): It is fascinating to observe that the price pattern traced out by the stock is in accordance with the Elliott Wave principle. The validity of various facets of technical analysis is quite apparent in the price chart of this stock. For any ardent student of technical analysis, there cannot be a better chart to see the interplay of important concepts such as support/resistance and Elliott Wave principle.

The stock dropped from a high of Rs 444 to seek support at Rs 270.1. There is a confluence of support at the Rs 270-280 range. The first support is the 61.8 per cent Fibonacci retracement of the earlier rally from Rs 175.7 to Rs 444, which works out to Rs 278.

And, the second support flows from the trendline connecting the previous peaks at Rs 200 and Rs 253.

This resistance line acted has turned out to be the support line, as the prices had moved past this level earlier.

After seeking support at this crucial confluence zone, the stock has staged a smart recovery in the past few weeks, which again is in classic "impulsive pattern" in Elliott Wave parlance. The stock could move to Rs 450-460 range shortly.

Hold with a stop-loss at Rs 370. Fresh exposures may also be considered on weakness, with a stop-loss at Rs 370.

Please let me know the technical support and resistance level of Jaiprakash Associates. — A. Lohia

Jaiprakash Associates (Rs 336): The stock could move to Rs 355-360 shortly. Hold with a stop-loss at Rs 310. Fresh exposures may be avoided. Partial profit-booking may be considered on the evidence of resistance at the target zone of Rs 355-360.

I purchased a huge lot of IDBI stock at Rs 100. Is it advisable to hold exit? — I.P. Puri

IDBI (Rs 93): The recent price patterns indicate that the stock could move to Rs 115-120. This view would be valid if the share price does not close below Rs 85. Remain invested with a stop-loss at Rs 84. Fresh long positions may also be considered with the stop-loss at Rs 84. Use a trailing stop-loss in the event of the share price moving past the target zone.

What are the prospects for Mysore Cements? — Prashanth Gowda, Kishore Matta.

Mysore Cements (Rs 26): It would be advisable to sell at least a portion of the holdings at prevailing levels as the near-term outlook is bearish. A drop to Rs 20-21 appears likely. Evidence of support at this level may be used to take fresh exposures. For the moment, there is no reason to hold the stock. Only a close above Rs 31 would impart short-term bullishness that could take the stock to the Rs 37-40 range subsequently.

Please advise about my holdings in Colgate at Rs 256 and Sesa Goa at Rs 1,089. — Uttam Debnath

Colgate (Rs 274): The stock is in uptrend that could take it to the target zone at Rs 325-330. Considering your entry price and positive outlook, it would be advisable to hold with a stop-loss at Rs 255. Fresh exposures may also be considered with the same stop-loss.

Sesa Goa (Rs 1,091): Hold on to your exposures in the stock, as there appears to be upside potential. A move to Rs 1,250-1,300 appears likely. Fresh exposures may also be considered on declines with a stop-loss at Rs 950. Stop-loss for existing long positions may also be placed at Rs 950.

What is the outlook for Nicholas Piramal bought at Rs 240? — Reena Saravanan, Alok Varshney

Nicholas Piramal (Rs 283): The outlook is positive and the share price could move to Rs 325-330 range. The positive view would be invalidated on a close below Rs 260. Stop-loss for long positions may be placed at Rs 260. Investors may also add the stock to their portfolio at prevailing levels, with a stop-loss at Rs 260.

What is your view on Satnam Overseas? — Swastik Bose, Deepak

Satnam Overseas (Rs 96): Hold with a stop-loss at Rs 88 as there is a possibility of a rally to Rs 115-120. This view would be negated on a close below Rs 88. Fresh exposures may be avoided. Use a trailing stop-loss if the stock moves past the Rs 120-mark.

With Subex Systems having announced bonus issue, will it be advisable to buy the stock now? — P.S. Rao

Subex Systems (Rs 800): Theoretically, a bonus issue of shares would be wealth-neutral for a shareholder. It would not have an effect on the overall returns generated by the stock. Though there have been instances where a stock, on turning ex-bonus, settles at a slightly higher price in relation to the theoretical ex-bonus price, this should not be the reason for making an investment decision.

As far as Subex is concerned, the stock could move to Rs 890-900 range. Investors may, however, avoid buying the entire budgeted lot at prevailing levels. A portion of the budgeted lot may be bought now and the stock may be accumulated on declines. A staggered approach is advisable, as the share price has moved into overbought zone in the weekly charts. A correction may be just round the corner.

I read your replies pertaining to Neo-Wave and Elliott Wave theory. I am interested in learning Neo-Wave theory. Is it necessary that I should learn "Classical Wave theory" first and then proceed to Neo-Wave or shall I start with Neo-Wave directly? Also, please suggest a few books on Fibonacci theory. — Rakesh

It is not mandatory that you should learn Classical Elliott Wave theory before studying the Neo-Wave theory. You may directly start your study with the book - Mastering Elliott Wave written by Glenn Neely. After studying the book, you may revert to the one written by Prechter and Frost that was mentioned last week.

As far as Fibonacci Theory is concerned, there are quite a few material available on the Internet. As far as books are concerned, we would recommend the book "Trading with DiNapoli Levels", authored by Joe DiNapoli. The book written by Robert Miner titled - "Dynamic Trading" is also a good book. Details about these books may be found at www.fibtrader.com and www.dynamictraders.com

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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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