Query Corner: GAIL attempting to break key resistance

Lokeshwarri S.K. | Updated on January 26, 2013 Published on January 19, 2013

Please let me know the prospects of E.I.D.-Parry and Carborundum Universal.

Sanjay Vaswani

E.I.D.-Parry India (Rs 181): This stock was in a strong uptrend from the March 2009 trough formed at Rs 62. But one leg of this uptrend ended at Rs 290 in January 2011 and the stock is in a long-term correction since then. This correction halted at the 50 per cent retracement of its previous up-move.

The long-term supports for the stock are at Rs 176 and then Rs 150. Long-term investors can hold the stock as long as it trades above the second support.

That said, the stock could stay volatile in a range between Rs 160 and Rs 290 for a few more months. The resistance between Rs 280 and Rs 300 could arrest rallies over the next year. Medium-term hurdles for the stock would be at Rs 215 and Rs 257.

Carborundum Universal (Rs 147.3): Carborundum Universal is in a strong long-term uptrend. Though the stock has been in a corrective phase since November 2011, this correction is resulting in narrow sideways movement and not a deep decline. This denotes strength in the uptrend. Key long-term support is at 132 and investors can buy the stock in declines with stop at this level. Subsequent support is at Rs 123.

The stock made a triple top formation around Rs 175 in 2011 and 2012. This will, therefore, turn into a strong ceiling for the stock. But strong break above Rs 175 can take the stock higher to Rs 228 over the long-term.

I am holding Aries Agro bought at Rs 70. Please let me know whether I should continue holding this share.

Sudhakar Naidu

Aries Agro (Rs 59.8): This stock reversed lower from its long-term resistance at Rs 204 in September 2010 and has been in a severe downtrend since then. This slide is, however, attempting to reverse higher since the low of Rs 48 recorded in September 2012. You can hold the stock as long as it manages to hold above this level. But decline below Rs 48 will take the stock lower to Rs 33 or even Rs 25.

The short-term rally that began in August will face resistance at Rs 85 and Rs 105. Investors with short- to medium-term perspective can exit the stock at either of these levels. The medium-term trend will turn positive only on a close above Rs 108. Inability to surpass this level will retain the negative medium-term outlook in the stock.

I have purchased BGR Energy at Rs 835. Please advise whether I should hold the stock or exit.

R. Krishnasamy

BGR Energy Systems (Rs 257.3): This stock spiralled lower from the September 2010 peak of Rs 871 to hit a nadir at Rs 172 last January. The rally from this low halted at Rs 373 and the stock is once again in a corrective decline.

This decline is halting at key medium-term support at Rs 250. If the stock manages to hold above this level, it will mean that a rally to Rs 325 or Rs 374 is possible over the coming months. Conversely, decline below Rs 250 will mean that the stock is heading for Rs 172 or Rs 107.

Could you please let me know the prospects of A2Z Maintenance and Engineering Services bought at Rs 58?

S. Krishnan

A2Z Maintenance & Engineering Services (Rs 51): This stock has been in a prolonged downward spiral since its listing in December 2010. The stock is currently trading at its lifetime lows at Rs 51. You seem to have purchased the stock recently. So you can hold on as long as it trades above Rs 50. But once this level is breached, it is difficult to discern where the next halt can be as the stock has limited trading history. Short-term resistances for the stock will be at Rs 90 and Rs 110. Key long-term resistances are at Rs 145 and Rs 200.

Please let me have your take on GAIL purchased two years ago at Rs 485. Should I book loss at this point or wait longer?

Vimal Bhatia

GAIL India (Rs 383.8): GAIL has been in a long-term decline from the peak of Rs 536 recorded in January 2011. But this fall is halting at the key long-term support at Rs 303 that occurs at 61.8 per cent retracement of the up-move from the October 2008 low. Long-term investors need not worry as long as the stock trades above this level.

Declines can also be used to accumulate the stock from a long-term perspective. That said, the stock faces medium-term hurdles at Rs 395 and Rs 447. It is currently grappling with the first resistance. Investors with short to medium-term perspective can exit the stock at either of these levels. Long-term view will turn positive only on a close above Rs 447 paving the way for a move towards the prior peak at Rs 535.

Can I buy CRISIL at current levels?

N Raman

CRISIL (Rs 1,004.6): CRISIL has been in a strong structural uptrend since the 2008 trough of Rs 184. One leg of this uptrend, however, halted at the long-term resistance zone between Rs 1,100 and Rs 1,150. It has been moving in a trading band between Rs 850 and Rs 1,150 since then.

Since the stock is reversing lower from the upper end of this band, it could decline to the lower end of its trading band at Rs 860 or further down to the long-term support at Rs 764.

Investors could use such declines to buy the stock with stop at Rs 756. It is, however, possible that the stock vacillates in the region between Rs 850 and Rs 1,150 before breaking higher to Rs 1,450.

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