Query Corner: ICICI Bank in long-term uptrend

Yoganand D | Updated on December 08, 2012 Published on December 08, 2012

Kindly advise on the medium- and long-term prospects of Zylog Systems purchased at Rs 153. Can I average by purchasing more?


Zylog systems (Rs 68.9): After encountering resistance in the band between Rs 320 and Rs 340 in April 2012, the stock moved sideways and reversed its direction downwards. Breaking a key support at Rs 280, the stock plunged sharply in October and November this year to resister a 52-week low at Rs 65 in late November. The stock has lost almost 80 per cent from its July 2012 peak of Rs 340. This steep fall in share price breaking through important long-term supports reflects shift in fundaments for the company. Therefore, we advise you to exit from the stock.

Medium and long-term trends are currently down for the stock. It has immediate support in the range between Rs 56 and 60. A decisive fall below this band will pull the stock down to Rs 40 and then to Rs 31 which is all-time low for the stock. On the other hand, to alter the medium-term view, the stock has to rally above Rs 140 and for long-term it has to move beyond Rs 200. Key immediate resistance are at Rs 80, Rs 100 and Rs 120.

I hold shares of Sabero Organics Gujarat since four years. What are the prospects for its appreciation in next 2-3 years?

Raghvendra Rao

Sabero Organics (Rs 130): This stock moved up sharply hitting upper circuits in early 2011. However, this rally failed to sustain and the stock tumbled in late 2011 knocking lower circuits. Holding this stock for long-term — 2-3 years — is risky as it is very volatile. Since then the stock has been in an intermediate-term uptrend. But after marking a new high at Rs 174 in September, the stock has been declining. It is now testing significant long-term support band between Rs 120 and Rs 130. Taking profits out of table is advisable at this juncture.

A decisive fall below Rs 120 will pull the stock down to Rs 100 and then to Rs 83 in the medium-term. Strong decline below the stock's long-term support at Rs 83 will reinforce bearish momentum and pull the stock down to Rs 60 and then to Rs 40 in the long-term. Rally above Rs 148 can take the stock higher to Rs 158 and then to Rs 170 in the medium-term.

I have stayed invested in ICICI Bank since 2008. I seek your medium-term outlook for the stock.

Kannan Padmanabhan

ICICI Bank (Rs 1,130.8): After retracing 61.8 per cent of the stock’s prior up leg, it took support at Rs 650 in December 2011. It has been in an intermediate-term uptrend since then. Moreover, the stock appears to have resumed its long-term uptrend that has been in place from its early 2009 low of Rs 252.

In September 2012, the stock emphatically broke out of key long-term resistance at Rs 1,000 and continued to move higher. Both medium and short-term trends are also up for the stock.

However, the stock currently faces resistance at Rs 1,150. Investors with long-term perspective can consider holding the stock with stop-loss at Rs 900. A conclusive breakthrough of Rs 1,150 will push the stock northwards to Rs 1,250 in the medium-term. Inability to rally above Rs 1,150 will confine the stock between Rs 1,000 and Rs 1,150 before the uptrend resumes. But a decline below Rs 1,000 can drag the stock to Rs 900. Important resistance above Rs 1,250 is at Rs 1,350.

I have Novartis bought at Rs 810. Please advise whether I should sell or average it.

Mohan M

Novartis India (Rs 677.9): Novartis has significant long-term resistance at around Rs 900. After testing this resistance in April 2012, the stock started to decline and has been in an intermediate-term downtrend. For the past four months, the stock has been hovering above its key long-term zone between Rs 620 and Rs 650. You can make use of this support zone to average and consider holding the stock with stop-loss at Rs 590.

An upward reversal from the aforementioned support zone can take the stock higher to Rs 750 and then to Rs 820 in the medium to long-term. The stock needs to conclusively breakthrough its key long-term resistance at Rs 900 to strengthen its bullish momentum and accelerate the stock to Rs 1,010 and then to Rs 1,135 in the long-term horizon. However, decisive fall below Rs 590 will mitigate the stock's long-term uptrend that has been in place since late 2008 trough at Rs 230. The stock can trend down to Rs 550 and Rs 510 levels.

Immediate support and resistance are at Rs 650 and Rs 700 respectively.

I have Renaissance Jewellery bought at Rs 70. What is the technical prospects for this stock?

Rama Krishna

Renaissance Jewellery (Rs 72.6): The intermediate-term downtrend that started in the stock from May 2011 peak of Rs 130 appears to have come to an end in September this year. Since then, the stock has been in a short-term uptrend. Nevertheless, in recent times, the stock is testing key resistance and its 200-day moving average at around Rs 75.

A conclusive breakout of Rs 75 will take the stock higher to Rs 80 and then to Rs 86 in the ensuing weeks. Short-term traders can consider holding the stock with stop-loss at Rs 63 levels.

Subsequent key resistance is pegged at Rs 90. Strong move above this level will encounter resistance at Rs 100 in the medium-term. Conversely, a downfall below Rs 60 will mar the stock's short-term uptrend and drag it down to Rs 55 or Rs 50 in the same time frame. Decisive plunge below the long-term support at Rs 50 will reinforce bearish momentum and pull it down to Rs 42 or Rs 32 in the long-term.

Please give your view on Tulip Telecom from long-term perspective.

Ashish Singh

Tulip Telecom (Rs 40.7): This stock has been in a structural downtrend ever since peaking out from its August 2009 high of Rs 250.

Medium as well as short-term trends are also down for the stock. For the past few months, the stock has been moving from circuit to circuit.

A decisive drop below Rs 35 will drag the stock down to Rs 20 in the months ahead.

Significant resistances are positioned at Rs 45, Rs 53 and Rs 66.

The stock needs to rally above Rs 70 and then Rs 90 to alter its short- and medium-term downtrend respectively.

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