Query Corner: Voltas struggling to cross key resistance

YOGANAND D. | Updated on October 20, 2012 Published on October 20, 2012

I am holding shares of Gruh Finance and will appreciate your analysis on this stock.


Gruh Finance (Rs 186.9): This stock has been on a structural uptrend ever since bottoming out in early 2009 around Rs 16 (adjusted for stock split). Medium-term trend is also up for the stock. However, after registering an all-time high at Rs 223.9 on October 4, the stock started to lose its bullish momentum and has been on a short-term downtrend.

Investors with a long-term perspective can hold the stock as long as it trades above Rs 120 with same stop-loss. A strong decline below Rs 120 will drag the stock down to Rs 100 and then to Rs 92.

The stock is hovering above its immediate support level at Rs 180. A slip below this level can pull the stock down to Rs 170 or Rs 160 in the short-term. Medium-term investors can hold the stock with stop-loss at Rs 160. But an emphatic rally above Rs 200 will take the stock higher to Rs 220. It can rally to Rs 250 in the long-term.

Please let me know the short- and medium-term prospects of Elecon Engineering and Voltas.

S. Sakaran

Elecon Engineering (Rs 50.1): In October 2010, the stock reversed downward from its significant resistance around Rs 100. Since then, it has been on an intermediate-term downtrend, making lower peaks and troughs. But after hitting a 52-week low at Rs 39 in late August this year, the stock witnessed some life and started to move higher.

The stock is currently testing key resistance at Rs 52. A strong breakthrough of this resistance will push the stock higher to Rs 56 or Rs 61 in the short-term. Important long-term resistances are pegged at Rs 66 and then at Rs 76. A significant rally above Rs 76 will alter the stock's intermediate-term downtrend, and take it higher to Rs 85 and Rs 95 levels in the approaching months.

However, failure to rally above its current resistance at Rs 52 will pull the stock down to Rs 45 and to Rs 40 in the short-term. Key support below Rs 40 is at Rs 30.

Voltas (Rs 118.2): Ever since peaking out from its November 2010 high of Rs 262, the stock has been on a long-term downtrend. But it found support at around Rs 71 in December last year and has since been on a modest medium-term uptrend.

The stock is facing difficulty in surpassing its key resistance around Rs 130. Only a decisive rally above this level can push the stock higher to Rs 145. This uptrend will turn stronger if the stock rallies above Rs 145. Key resistances above this level are at 168 and Rs 190.

However, the stock is in a near-term downtrend. Fall below its key support at Rs 115 will pave the way for a decline to Rs 105 or Rs 100 in the short-term. An emphatic fall below Rs 100 will mar its medium-term uptrend and drag the stock down to Rs 90 or even back to Rs 71 in the medium-term.

I bought Reliance Power at Rs 128. When would it touch this, or a higher price? Is this stock good to buy for the long-term at this level?

Pratik Jain

Reliance Power (Rs 101): You bought the shares just below the stock's significant long-term resistance band between Rs 130 and Rs 135. The stock failed to clear this zone in April last year and again in March this year.

The stock has been on a short-term uptrend from this September low at Rs 75. Even so, at current levels, it is not advisable to buy the stock as it is facing key resistance as well as trend-deciding level at Rs 110. Strong breakthrough of this level will accelerate the stock to Rs 121 and then to Rs 130-135 resistance range in the months ahead.

A decisive breakout of the stock's long-term resistance range between Rs 130 and Rs 135 is required to turn its medium-term outlook positive. Strong move above this resistance will give long-term targets of Rs 150 and Rs 170.

Investors with a long-term perspective can consider holding the stock with stop-loss at Rs 70. A decline below the stock’s immediate base at Rs 93 will pull it down to Rs 85 and then to Rs 75 in the short-term.

I bought Kalindee Rail at Rs 204. Should I book losses now or is there a chance for the stock to regain lost ground?

K.P. Jayaram

Kalindee Rail Nirman (Rs 80.7): The stock has been on long-term downtrend from its December 2009 peak of Rs 239. Medium-term trend is also down for the stock. However, the stock found support at around Rs 65 in May and August this year and is forming a key base at this level.

We observe the formation of a double bottom pattern, or a bottom reversal pattern with neck line at Rs 80, which the stock is testing.

Only a strong break out of the neckline will signify completion of the pattern, which gives a target of Rs 100 in the medium-term. Next significant resistances are at Rs 110 and Rs 125. A strong rally above Rs 125 will take the stock higher to Rs 150 and then to Rs 180.

A failure to rally beyond Rs 125 will confine the stock to moving in the broad range between Rs 90 and Rs 125. You can consider exiting from the stock in rallies. Strong fall below Rs 72 will drag the stock down to Rs 65. Decline below Rs 65 will see the stock registering multi-year lows and subsequent base is at Rs 50.

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