QUERY CORNER: ONGC in sideways consolidation phase

Please advise on HEG and GNFC.

R.T. Gupta

HEG (Rs 228.5): HEG has long-term resistance at Rs 412. The stock reversed from this level in August 2010 and was in a long-term decline till the end of 2011. Though this decline was very severe dragging the stock below its long-term support at Rs 216, a steady uptrend is in progress over the last one year from the trough formed at Rs 141. This can serve as a stop-loss for long-term investors.

This uptrend will face resistance at Rs 244 and Rs 312 in the months ahead. The stock is currently struggling to surpass the first resistance level. Investors with a medium-term perspective can hold the stock with stop at Rs 185. The stock can also be bought in declines with the same stop. Strong break above Rs 256 can take the stock towards Rs 312 or Rs 412 over the long-term.

GNFC (Rs 81.7): Gujarat Narmada Valley Fertilizers & Chemicals (GNFC) resumed its long-term downtrend after retracing half of the decline from the December 2007 peak. This decline is attempting to halt in the support zone around Rs 75, moving in a sideways range between Rs 75 and Rs 90 since December 2011. Investors can hold the stock with stop at Rs 70.

Those wishing to buy the stock can wait for a break above Rs 92 before doing so. Subsequent targets are Rs 100 and Rs 118. The long-term view will turn positive only on a break above Rs 118. Subsequent targets are Rs 146 and Rs 161.

I have shares of Oil and Natural Gas Corporation (ONGC) bought at Rs 325. I can hold the share for two more months. Will I get my money back during this period?

Parvez Daruwala

ONGC (Rs 292): This PSU behemoth has been in a long-term decline since the peak at Rs 368 formed in January 2010. However, this decline is attempting to halt at the long-term support at Rs 236 and the stock has been moving in a trading band between Rs 250 and Rs 300 since June 2011.

A sharp up-move is currently in progress that has resulted in the stock rising from Rs 255 to Rs 302, a 23 per cent gain, in the last three weeks. Since the stock is currently near the upper end of its trading band, investors need to tread a little more carefully.

The stock will face resistance at Rs 305 and then at Rs 320 in the weeks ahead. Investors can divest their holdings at either of these levels. The long-term view will turn positive on a close above Rs 320, taking the stock towards the peak at Rs 368.

But reversal from Rs 320 will shackle the stock in the above-mentioned trading band for some more time.

I bought DISA India for Rs 2,900. I am willing to hold for long-term. Please explain the outlook of this stock.

S. Jaikumar

DISA India (Rs 2,815): The long-term support for DISA India is around Rs 2,400. The stock reversed from this level in May and November 2012. The rally that began last November from the trough at Rs 2,323 continues to be in force.

Investors with short-term investment horizon can hold the stock with stop loss at Rs 2,600. Investors willing to hold the stock for the long-term can maintain the stop loss at Rs 2,300.

That said, the stock will face resistance in the region between Rs 2,960 and Rs 3,150 in the months ahead. The stock needs to surpass this zone to get to the next target at Rs 3,330. Long-term view will turn positive only on a move beyond this level.

Please let me know the prospects of GMDC and FAG Bearings.

Altaf

GMDC (Rs 204.1): Gujarat Mineral Development Corporation (GMDC) has been in a steady long-term uptrend since the 2008 trough at Rs 25. This uptrend has, however, taken the stock to its key long-term resistance around Rs 200. This level occurs at 61.8 per cent retracement of the stock’s decline from the November 2011 peak.

A sharp break beyond this level will mean that the stock can move on to Rs 262 and then to Rs 305 over the long-term. But failure to do so can pull the stock lower to Rs 145 or Rs 100 in the medium-term.

Investors wishing to purchase the stock should, therefore, wait for a firm break above Rs 220 before doing so. Investors with short- to medium-term perspective can book partial profits at current level and hold rest of their holding with stop-loss at Rs 145.

FAG Bearings India (Rs 1,684): FAG Bearings has been in a stellar uptrend since the low recorded in March 2009. It is currently trading 134 per cent above its December 2007 peak. The long-term view on the stock will be threatened only if the stock goes on to close below Rs 1,200.

This can, therefore, serve as the stop-loss for long-term investors. Investors with a lower investment horizon can hold the stock with a higher stop at Rs 1,400.

The stock could continue to face a hurdle around Rs 1,800. Inability to move beyond this level will result in the stock vacillating in the range between Rs 1,500 and Rs 1,800 for a few more months.

Long-term targets on a move above Rs 1,800 are Rs 2,000 and Rs 2,200.

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