The Hindu Business Line : Query Corner: What the charts say

ICICI bank (Rs 434.1): This stock declined below the October 2008 trough of Rs 282 in March reinforcing the strong long-term down-trend that is still in force.

However, ICICI Bank is moving in a broad range between Rs 250 and Rs 500 since last October. This could be construed as a long-term base-building by the stock and the stock can continue to move in this band for a few more months. If the lower boundary is breached, next long-term support is between Rs 220 and Rs 240.

Key resistance level for the next 12 months would be Rs 610 and Rs 720. Medium-term investors can book some profits around this level. A strong break above this level is required to take the stock to Rs 860 or Rs 1,000. Long-term investors can hold the stock with a stop at Rs 210 while medium-term investors can hold with a higher stop at Rs 330.

Reliance Capital (Rs 557.6): The long-term trend in Reliance Capital too is down; the stock almost halved in value from its January peak and finally bottomed at Rs 274 in March. This is a strong long-term support for the stock since it coincides with the peak formed in March 2000.

A morning star formation in the monthly candlestick chart too implies that the stock could have formed a sustainable trough this March.

Immediate resistance for the stock is at Rs 622. But once this level is crossed, the stock can go on to the resistance band between Rs 800 and Rs 850 where the long-term moving averages are positioned. This could be ceiling for the stock for the next three months. Stop loss for medium term investors can be at Rs 385.

Please tell me the technical outlook for GE Shipping. Is it out of the bear phase yet? Jagjit

GE Shipping (Rs 209.8): This stock has tested the support band between Rs 140 and Rs 150 four times since last October.

The long-term trend-line drawn from the 2000 low is also positioned here and forms a good support for the stock. It can however not be inferred that the bear phase is complete.

A weekly close above Rs 300 is required to signal that the long-term trend in the stock is reversing higher.

Key resistance for the short-term would be at Rs 250. Investors with a short to medium-term perspective can book some profit around this level.

A strong break-out above this level will take the stock to Rs 312 and Rs 410. Investors should divest the stock on a close below Rs 140 since the next long-term support is at Rs 103.

Can I buy Power Trading Corporation at current level? J Rajagopalan

Power Trading Corporation (Rs 74.9): PTC has long-term support around Rs 45 from where it reversed in April 2005 and again in June 2006. This level supported the stock in October 2008 too and it is currently in a strong medium term up-trend since the low formed at Rs 43 on October 27, 2008.

The stock formed a higher trough at Rs 56 in March 2009, reinforcing the bullish medium term view.

Investors with a short to medium-term perspective can buy PTC with a stop at Rs 64. Short-term targets for the stock are Rs 87 and Rs 92. Investors with a longer horizon can wait to buy in declines with a stop at Rs 54. Upper target for the next 12 months is Rs 110 and Rs 140.

What are the medium and long-term prospects of OnMobile Global and Thermax? Dipesh

Onmobile Global (Rs 342): Onmobile Global more than doubled in value from its February trough at Rs 185. The long-drawn sideways move between Rs 180 and Rs 250 witnessed between November 2008 and February 2009 appears to be a consolidation phase to lay the foundation for the next up-move. That said, the stock faces immediate resistance at Rs 400. Failure to rally above this level can take the stock to Rs 260 or lower over the medium-term.

Medium-term investors can hold the stock with a stop at Rs 300 while long-term investors can hold with a deeper stop at Rs 180.

A strong break above Rs 400 will take the stock to Rs 540 over the next 12 months. Fresh purchases are therefore recommended only on a strong close above Rs 400 or on a decline to the zone between Rs 250 and Rs 280.

Thermax (Rs 234.5): This stock appeared to be plunging in to a bottomless pit in March this year. But the rally since March 16 has made Thermax gallop to a 70 per cent gain in five-weeks. Short-term resistance band for the stock is in the band between Rs 280 and Rs 300. The stock could struggle to move past this zone just yet. Investors with a medium-term perspective can hold with a stop loss at Rs 220.

However, the magnitude of the decline witnessed since 2008 implies that the stock will be unable to get back to its previous highs for the next two years at least. The upper ceiling for this stock over the next two years is likely to be in the band between Rs 450 and Rs 550.

I would like to purchase Fortis Healthcare and Wockardt from a two year perspective. I would like your advice on the right price at which to buy these stocks. I can take a 10 to 12 per cent downside risk. Suneel.

Investors in equities, especially long-term investors should be cognizant of the fact that while the returns are high in this class of investment, the attendant risk is also high.

The exposure to equity in a portfolio should be adjusted according to the risk-appetite of an investor. And even within equity, sector concentration is not advisable.

Your risk-taking ability of 10 to 12 per cent is too small to permit investment in mid-cap stocks such as Fortis Healthcare and Wockhardt Pharma that can move more than 12 per cent in just one session. Only investors with a higher risk-appetite can consider investing in these stocks.

Fortis Healthcare (Rs 67.2): Fortis Healthcare has limited trading history so it is not possible to give a long-term view on this stock. The all-time low was at Rs 45 formed in October 10 and the stock has been on a steady up-trend since then.

But there is a strong resistance around Rs 75 that is arresting the rallies in this stock. Investors can accumulate the stock in declines in the band between Rs 55 and Rs 65. The other option would be to buy on a close above Rs 75. Subsequent targets would be Rs 85 and Rs 92.

Wockhardt (Rs 102.6): This stock recorded a nine-year low at Rs 67 in March and has been gaining steadily since then.

The double bottom formed in April and morning star in the monthly candlestick chart are positive from a long-term perspective. Immediate resistance is at Rs 102. Investors can buy on a weekly close above this level.

If the stock is unable to move above this resistance, then buy in the band between Rs 80 and Rs 90 with a stop at Rs 65.

— Lokeshwarri SK

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