The Hindu Business Line : Technical Analysis Q&A

Aurobindo Pharma (Rs 625.5): The stock had a dream run in the later part of 2005 and first half of 2006. This rally made the stock multiply almost three-fold. However, since May 2006, the stock is moving in a broad range between Rs 500 and Rs 800. Since this consolidation phase comes after a multi-year rally, it would be construed as positive for the long term.

Medium-term investors can buy the stock in the zone between Rs 500 and Rs 550 with a stop at Rs 500. The medium term target would be the upper boundary of the current range, Rs 800.

Short-term investors can buy with a more shallow stop at Rs 590. Short-term resistances would be encountered at Rs 680 and then Rs 710.

I have bought Zee News at Rs 56. Can you tell me the prospects for this company? R. Mohan

Zee News (Rs 61): This stock is correcting the steep rally recorded in July. The immediate support is present at Rs 56. You can hold the stock with a stop at Rs 55. Further fall will make the stock return to the support band between Rs 40 and Rs 45. Short-term rallies can face resistance at Rs 66 or Rs 69. Exit at either of these levels is recommended for short-term investors.

I purchased Uttam Galva Steel at Rs 46 in March 2006. Kindly let me know your outlook for this stock. M. K. Mital

Uttam Galva Steels (Rs 34.4): This scrip has formed a long-term peak at Rs 75 in March 2005. Though the slide from this peak has been stemmed at Rs 23 in June 2006, the stock has not made much headway, moving sideways between Rs 25 and Rs 40 since then. It can continue to remain confined to this range over the next one year too. Investors with a shorter time horizon can book profits in minor rallies to Rs 40 or Rs 45. A close above Rs 45 is required to take the stock towards the next target at Rs 51. Stop loss level can be at Rs 27.

I have purchased Aksh Optifibre at Rs 40. Please let me have your outlook on this share. Peter Thomas

Aksh Optifibre (Rs 56.5): Aksh Optifibre reversed after making a double top at Rs 90 in May 2006. The stock has been sliding lower since then. This slide halted around the long-term support that exists at Rs 40. A sharp rally was witne ssed last week that resulted in the stock gaining 40 per cent.

It has also managed to close above its long-term averages this week, thus making the medium term outlook positive. The stock is expected to move higher to Rs 63 and then to Rs 70 in the near term. But a move beyond Rs 70 is required to take the stock to Rs 90. Investors with a shorter time-frame can book profits in the zone between Rs 65 and Rs 70. Hold till then with a stop at Rs 46.

I hold shares of Orient Abrasives purchased at an average of Rs 25 and shares of Taj GVK Hotels purchased at the cost of Rs 230. Please advise the prospects of these two companies. Should I hold these shares or sell them? M. Narasimha Rao

Orient Abrasives (Rs 23.7): Orient Abrasives has fallen from a peak of Rs 44 in August 2005 to a low of Rs 14 by July 2006. A narrow range-bound move between Rs 15 and Rs 25 has been observed since then. But the move since April is mor e promising as the stock is rising gradually, while staying above its long-term moving average lines. We expect the stock to move up to Rs 26 and then Rs 30 in the medium term.

The presence of strong intermediate term resistance at Rs 33 will make it difficult for the stock to clear this level over the next one year. Consider booking profits in the zone between Rs 30 and Rs 33.

Taj GVK Hotels (Rs 141.7): Taj GVK Hotels is in a vicious down trend. The third part of the down trend that commenced from the Rs 344 peak is currently in motion and has dragged the stock towards its long-term support at Rs 136. The st ock can form a long-term trough at this level and move up towards Rs 220 or Rs 250 again. However, the long-term outlook for this stock will turn positive only if it moves above Rs 270.

Hold the stock with a stop at Rs 134 and try to exit the stock as it nears your cost price. If there is a fall below Rs 136, the slide can halt at Rs 98.

I have purchased Subex Azure at Rs 730 per share this year. It has fallen drastically. Please advise whether I can accumulate at these levels. Ramanathan, Alok Ghosh

Subex Azure (Rs 585.2): Subex Azure is in the process of charting a reversal after completing a three-wave move from the peak at Rs 803. The stock has bounced from the long-term support at Rs 500. This implies that the long-term bull m arket that commenced in 2003 is still intact. You can hold on to the stock until it trades above this support. Fresh position can also be taken at current levels with a stop at Rs 480.

We expect the stock to move higher towards Rs 675 and then Rs 750 over the next one year. The positive view will get negated only on a fall below Rs 500. Investors should then brace themselves for a slide down to Rs 415 or Rs 325.

I had purchased shares of Idea Cellular at Rs 128 and Granules India at Rs 132 in May 2007. Please give your outlook on both these stocks. I am a short-term investor and do not book losses. I prefer to wait. Munish Bhatheja

It is not a good idea to have a policy of not booking losses. The only way to making profits in the long run is by exiting loss-making positions early and by allowing profit-making positions to run.

Short-term investors should keep a mental stop loss at least 10 per cent below the acquisition price. If the stock falls below this level, exit and re-invest in another stock. This would help you to ward off large losses that cause considerable erosion to the capital. Secondly, keeping money locked up in under-performing stocks would result in rising opportunity cost.

Idea Cellular (Rs 121.5): Idea Cellular has limited listed history. That makes it difficult for us to give a long-term view on this stock. The stock has been moving in a broad range between Rs 110 and Rs 135 since May. The intermediate term support for the stock is present at Rs 103. If the stock holds above this support, we can expect a move higher to Rs 135 and then Rs 155 over the next one year. But the stock is facing resistance from Rs 124 level in the near term. A reversal from this level can drag the stock down towards Rs 100 again. Wait for a dip to the zone between Rs 100 and Rs 110 before adding to your holdings.

Granules India (Rs 104.3): Granules India has a volatile trading history made up of steep rallies and sharp falls. But the positive factor is that the stock has been recording higher troughs since 2005 and moving in a broad upward movi ng channel. The lower boundary of this trend channel is currently positioned at Rs 90. We do not expect this level to be breached in the medium term. Since the stock is trying to stabilise itself since the recent low at Rs 95, you should hold the stock with a stop at Rs 90. Granules India can attempt to rally to Rs 112 or Rs 121 in the short term. Investors with a short-term horizon can exit the stock around the second target.

— Lokeshwarri S.K.

(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.)

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