Portfolio

Query Corner: Long-term trend positive in Cairn India

Lokeshwarri S.K. | Updated on February 19, 2011 Published on February 19, 2011

Cairn India formed the long-term peak at Rs 342 in May 2008 and the resistance around this level is once again thwarting the rally that is in progress since the October 2008 low.

Please let me know your view on the charts projection of Cairn India.

Manoj

Cairn India (Rs 316.1): Cairn India formed the long-term peak at Rs 342 in May 2008 and the resistance around this level is once again thwarting the rally that is in progress since the October 2008 low.

The stock formed the recent peak at Rs 368 in August last year and is currently in a consolidation phase.

The long-term view for the stock stays positive and the current correction can result in the stock moving between Rs 270 and Rs 360 for few more months before moving higher.

Investors can, therefore, hold the stock with stop at Rs 260. Subsequent supports are at Rs 240 and Rs 210.

Long-term target on a breakout above Rs 360 is Rs 436.

Please advise me on the long-term outlook of Selan Exploration.

D.S. Negi

Selan Exploration Technology (Rs 328): Selan Exploration raced from Rs 90 to Rs 420 between March 2009 and January 2010. But it encountered strong resistance in the band between Rs 400 and Rs 425. The stock hammered away at this ceiling from January to April last year before reversing lower. The correction is, however, turning in to a sideways movement in the range between Rs 300 and Rs 400.

Long-term outlook for this stock remains positive as long as it trades above Rs 290. Investors can hold the stock with the same stop-loss. Long-term targets, if this support holds, would be Rs 500 and Rs 630. Supports below Rs 300 are at Rs 252 and Rs 214.

Please explain the medium-term trend for Bata India and Opto Circuit.

Pankaj

Bata India (Rs 337.9): This stock has long-term resistance in the band between Rs 290 and Rs 330. It reversed from this zone to form long-term peaks in May 2006 and then in January 2008. The stock moved beyond this resistance band in August last year and is trying to hold above this zone ever since. Key medium-term support is between Rs 290 and Rs 300. Investors with medium-term perspective can hold the stock with stop at Rs 280. Medium-term resistance would be at Rs 390 and Rs 420. Long-term target on a move above Rs 420 would be Rs 512. Supports on a decline below Rs 290 would be available at Rs 250 and Rs 210.

Opto Circuit (Rs 263.7): Opto Circuit is in a sharp correction since its November peak of Rs 326, losing about 30 per cent since then. But the good news is that the stock is attempting to stabilise above its first medium-term support at Rs 230. Investors can hold the stock with stop at Rs 220. Sideways move in the broad range between Rs 220 and Rs 320 is possible for a few months. Such a move would be construed as positive from a long-term perspective and can pave the way for rally to Rs 383 over the next 12 months. However decline below Rs 220 would pull the stock to Rs 200 or Rs 168.

Kindly provide your views on Koutons Retail purchased at Rs 85, Tanla Solutions purchased at Rs 20 and Power Grid Corporation purchased at Rs 114.

Rajesh

Koutons Retail (Rs 31.9) and Tanla Solutions (Rs 20): Since there is great similarity in the price movement of Koutons Retail and Tanla Solutions, we can look at these two stocks together. Both stocks are at life-time lows and continue to plumb new lows. There is no sign of a bottom formation in either of these stocks.

Tanla Solutions has short-term peak at Rs 33 and a weekly close above it will be the first signal that the downtrend is reversing. Corresponding level in Koutons is Rs 60. Our advice would be to switch out of both stocks as the money invested in some other stock with better prospects can earn better returns.

Power Grid Corporation (Rs 97.6): We had visited this stock last in December 2009. We had then observed that Power Grid Corporation could move sideways between Rs 100 and Rs 130 and supports below Rs 100 was indicated at Rs 91 and Rs 82. Stop-loss for long-term investors was suggested at Rs 80.

The outlook for this stock has not altered greatly since then. We continue to advise long-term investors to hold with stop at Rs 80. Decline below Rs 90 would also be an opportunity to accumulate this stock with the same stop loss.

Power Grid Corporation is, however, an investment for those with infinite patience and hence investors with lower investment horizon should stay away from the stock. It can continue its exasperating sideways move for few a more months between Rs 90 and Rs 105. Next medium-term target is Rs 115. Long-term target on move above Rs 130 is Rs 170.

I would like to buy Tractors India Ltd (TIL). Please provide your opinion on the stock and its technical levels.

Venkatesh

TIL (Rs 556.9): Tractors India reversed lower in January after making multiple attempts to move above Rs 750.

The stock has strong medium-term support in the band between Rs 480 and Rs 500 and it is currently attempting to rebound from this zone.

Investors can buy the stock at current level with stop at Rs 480. Sideways move between Rs 500 and Rs 750 would be positive for its long-term prospects.

However, decline below Rs 480 can usher in a sharp decline to Rs 400 or Rs 320.

Investors with short-term horizon should, therefore, divest their holdings on a decline below Rs 480. Medium-term resistances for the stock are Rs 590, Rs 650 and Rs 750.

I bought Delta Corp two months ago at Rs 94 and Tata Global Beverages at Rs 116. Should I hold these stocks or book loss?

Aparna R.

Delta Corp (Rs 69): This stock is in a medium-term correction since the November peak of Rs 142. This decline appears to be retracing the entire rally from the October 2008 low of Rs 16. Key long-term support for the stock is at Rs 64. The stock is attempting to rebound after testing this level briefly. Long-term investors can hold the stock as long as it trades above Rs 64 on a weekly closing basis. Decline below that can drag the stock to Rs 40 or even to Rs 30.

If the stock manages to sustain above Rs 60, it can rally to Rs 90 or Rs 110 in the days ahead, when investors with short- and medium-term perspectives can divest their holdings. Failure to move above Rs 110 will result in the stock moving in the range between Rs 60 and Rs 110 for a few more months.

Tata Global Beverages (Rs 94.6): This stock recorded the peak of Rs 139 in October and is moving lower since then. Medium-term supports based on Fibonacci retracement levels are at Rs 90 and Rs 80. The stock dipped below the first support briefly before rebounding. Investors can hold the stock as long as it trades above Rs 80.

Medium-term targets on a sustained reversal are Rs 104 and Rs 116. Failure to move above Rs 116 will result in a broad trading range between Rs 85 and Rs 116 in the ensuing months.

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