Portfolio

Query Corner: Asian Paints in a short-term downtrend

Lokeshwarri S.K. | Updated on June 25, 2011 Published on June 25, 2011

I have purchased shares of Sun Pharma Advanced Research Company at Rs 93. Please let me know the medium and long-term outlook of this stock.

Priyanka Gillon

Sun Pharma Advanced Research Company (Rs 91): This stock continues to be in a structural down-trend since it has retraced only half of the decline recorded in 2008 to date. The long-term outlook will turn positive only on an emphatic weekly close above Rs 130. Such a move will pave the way for a rally towards the stock's previous life-time high at Rs 186.

However, failure to move beyond this resistance will mean that the stock will vacillate in the range between Rs 70 and Rs 130 over the ensuing months. Investors need to start fretting only on a close below Rs 65.

This can also serve as the stop-loss for long-term investors.

The stock will face resistance at Rs 110 and Rs 130 over the medium-term. Investors not in the stock for the long haul can divest their holding at either of these levels. Stop-loss for medium-term investors can be at Rs 78.

I own shares of ITD Cementation. Please let me know the medium and long-term outlook of this share.

MuraliMohan

ITD Cementation India (Rs 153.1): ITD Cementation continues in the throes of a long-term bear market.

The recovery since the first quarter of 2009 stalled around Rs 290, much below the long-term trend decider at Rs 475.

Any rally over the next two years is likely to face strong resistance in the band between Rs 475 and Rs 500. Long-term prospects will turn positive only on a strong close beyond this band.

The stock is currently halting at the key medium-term support around Rs 145.

Investors should divest their holding on a close below this level since that would usher in a fall to Rs 100 or even Rs 70 in the ensuing months.

Conversely, reversal above Rs 145 will take the stock higher to Rs 205 or Rs 240.

I have bought shares of Edelweiss Capital at Rs 62 and Shanthi Gears at Rs 51. Can I sell these shares at current levels?

N. Gopalakrishnan

Edelweiss Capital (Rs 33.9): The trends along all time-frames, long, medium and short are currently down in Edelweiss Capital.

Its long-term view will improve only if the stock goes on to close above Rs 82. Otherwise, the stock could keep moving in a range between Rs 20 and Rs 80.

Key medium-term support for Edelweiss Capital is at Rs 40. Since the stock has closed strongly below this level, it can now go on to slide to Rs 27 or even Rs 22.

It would be best to exit the stock at current levels and consider re-entry only on a close above Rs 45. Subsequent targets are Rs 54, Rs 68 and Rs 82.

Shanthi Gears (Rs 41.3): This stock is moving in a broad trading range between Rs 35 and Rs 60 since May 2009.

The lower boundary of this range is an important trend-decider for the stock and investors can continue to hang on as long as it holds above it. It however needs to be borne in mind that breach of this support can result in the stock plummeting to Rs 29 or even Rs 24.

The stock will face resistance at Rs 47 or Rs 55 over the ensuing weeks and investors with a short investment horizon can exit the stock at either of these levels. Medium-term view will turn positive only on a close above Rs 55. Subsequent targets are Rs 60, Rs 70 and Rs 82.

Please advise on the future of Gateway Distriparks bought at Rs 214.

M.V.N. Rao

Gateway Distriparks (Rs 126): You have purchased Gateway Distriparks close to its 2005 peak at Rs 240.

The stock is in a long-term bear trend over the last six years and it is hard to envisage a move towards this peak just yet.

The stock could, in fact, struggle to move above the strong resistances at Rs 142 and Rs 166. The long-term outlook will turn positive only on a close above the second resistance.

That said Gateway Distriparks has strong support around Rs 95 and below that at Rs 83. Investors can hold the stock as long as it trades above Rs 80.

Continued movement in the range between Rs 100 and Rs 150 will be positive from a medium-term perspective and pave the way for a break-out above Rs 166 over the next couple of years.

What is short-term view for Asian Paints and medium-term view for Lakshmi Vilas Bank?

Vivek and JP

Asian Paints (Rs 2,975.8): In our review of Asian Paints in October last year, we had stressed that the stock was in a strong uptrend. We had also given the target above Rs 3,000 at Rs 3,250. The short-term stop-loss was given at Rs 2,420 while the long-term stop-loss was advised at Rs 1,300.

Though the stock tested our short-term support in February, to record the low at Rs 2,395, it did not sustain there for even two days implying that even the short-term up trend is un-violated.

The stock is currently in a short-term down-trend since the recent peak of Rs 3,230. Short-term supports are at Rs 2,900 and Rs 2,725.

Short-term investors can buy the stock in declines as long as it holds above the second support.

Reversal from either of these levels will see the stock heading higher to Rs 3,427 or Rs 3,570 over the ensuing months. Stop-loss for medium-term investors can be at Rs 2,390.

Lakshmi Vilas Bank (Rs 115.5): The medium-term trend in Lakshmi Vilas Bank is down since the September 2010 peak of Rs 143.

This downtrend is however attempting to halt after retracing half of the up-move from March 2009 low.

Investors need not worry as long as the stock trades above Rs 78. This buttress needs to be breached to denote that the stock is heading downward to the next support zone around Rs 72.

The stock, however, faces key resistance around Rs 120 and inability to rally over this level will result in the stock heading down towards Rs 90 or Rs 78 again.

On the other hand, rally above Rs 120 will lift the stock towards its previous peak of Rs 143.

Kindly let me know the medium-term prospects of Vivimed Labs.

K. Shiva

Vivimed Labs (Rs 282.1): This stock has been extremely volatile since last November.

The down-moves in this stock are however halting above the key medium-term support at Rs 228.

Investors with medium-term perspective can hold the stock as long as it trades above this level. However, decline below this support will drag the stock to Rs 190 or Rs 155 over the medium-term.

Key medium-term resistance is at Rs 315 and then at Rs 350.

Strong break above Rs 350 will propel the stock to Rs 412 over the long-term.

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