Query Corner: Pidilite Ind testing key long-term resistance

Could you please advise me regarding medium- and long-term outlook of Lovable Lingerie purchased at Rs 412. Can I add more?

Rajeev Gera

Lovable Lingerie (Rs 342.3): Following a strong rally in August 2011, the stock encountered resistance at Rs 635 in September and peaked out. Intermediate-term downtrend has been in place since then. However, the stock's key long-term base in the band between Rs 300 and Rs 310 is providing support.

Last month, the stock took support for this band and started moving higher. It has to rally beyond Rs 400 which is a significant resistance as well as medium-term trend deciding level. A conclusive rally above this will take your holding into breakeven and thereafter green. The stock can trend higher to Rs 450 and then to Rs 480, where partial profits can be taken off the table.

A decisive move beyond Rs 480 will revise the intermediate-term downtrend and take the stock northwards to Rs 520 and Rs 545. Next important hurdle is at Rs 625. Long-term investors can hold the stock as long as it trades above Rs 300. But a plunge below this support will drag the stock down to Rs 240 and Rs 250 band.

I am holding shares of NIIT Technologies at Rs 200. Kindly advise me on the long-term outlook. Should I hold or book profit?

V.K. Divya, Himanshu Gupta

NIIT Technologies (Rs 263.9): Both of you are sitting on good profits in NIIT Technologies. After encountering resistance in the range between Rs 300 and Rs 310 in late May and early August this year, the stock has started to decline. At this juncture, taking partial profits off the table is advisable. Consider holding the rest with stop-loss at Rs 240, which is a significant support. An emphatic fall below Rs 240 will mar the stock's uptrend that has been in place since the last December trough. In that case, the stock can decline to Rs 220 and Rs 200 in the medium-term. Key support below Rs 200 is at Rs 165 to Rs 175 band.

The stock has important medium-term resistance at Rs 280. Strong jump above this resistance and then Rs 300 will imply resumption of uptrend. Long-term targets for the stock are Rs 336 and Rs 375. Investors with long-tem perspective can consider holding the stock with stop-loss at Rs 200.

Please let me know your outlook on Pidilite Industries.

Vijaibabu M

Pidilite Industries (Rs 179.9): Ever since bottoming out in early 2009 trough at around Rs 40, the stock has been on a structural uptrend. But it encountered resistance at Rs 183 in July 2011. This level still acts as a strong resistance as the stock failed to surpass it in early May this year. The stock is currently testing this key resistance.

Both medium- and short-term trends are up for the stock. A conclusive breakthrough of the aforesaid resistance will strengthen the stock's up move and lift it to Rs 200 and then to Rs 215 in the medium- to long-term. Inability to surpass this resistance will pull the stock down to Rs 170 in the short-term.

An emphatic tumble below the stock's next significant support zone between Rs 155 and Rs 160 will mitigate its medium-term uptrend and drag it down to Rs 140 and then to Rs 125.

I have shares of Bank of India bought at Rs 350. Please give short- and medium-term targets of this stock.

Rajesh Reddy

Bank of India (Rs 276.7): After marking a life-time high at Rs 588 in October 2010, the stock changed direction and has been on an intermediate-term downtrend. The stock has fallen 21 per cent from your buy price. Both short- and medium-term trends are also down for the stock.

Nevertheless, it is testing its important long-term support band between Rs 260 and Rs 270. There are no clear signs of trend reversal yet in the stock. But an upward reversal from the current support will push the stock higher to Rs 300.

The stock needs to move beyond Rs 320 to alter its short-term downtrend and has to breakthrough Rs 350 to reverse the medium-term trend. Strong jump above Rs 350 can take the stock higher to Rs 380 and to Rs 400 in the medium-term.

Investors with long-tem perspective can consider holding the stock with stop-loss at Rs 250. A downward breach of Rs 250 will pave the way for a fall to Rs 224 and to Rs 200 in the medium-term.

I have brought Gujarat Gas at Rs 395. Should I wait for my actual price or sell at current market price?

Prakash C.S.

Gujarat Gas Company (Rs 302.3): Gujarat Gas took long-term support at Rs 85 in late 2008 and resumed its upward journey. Long-term trend is up for the stock and it remains in place as long as it trades above Rs 270. Investors with this time-frame can consider holding the stock with stop-loss at Rs 270.

Decisive breakthrough of key long-term resistance at Rs 350 will take the stock higher to Rs 405 and to Rs 438 in the long-term. However, failure to rally above Rs 350 will prolong the stock's sideways consolidation phase in the range between Rs 290 and Rs 350. A decline below the lower boundary at Rs 290 can pull the stock lower to test its key long-term support at Rs 270. Long-term investors should be cautious and exit the stock if it declines below Rs 270. Slump below this level will drag it down to Rs 226 or to Rs 200 levels.

Kindly discuss the medium- and long-term outlook of Cadila Healthcare.

Anil

Cadila Healthcare (Rs 875): Medium- as well as long-term trends are up for Cadila Healthcare. Strong jump above the key resistance at Rs 800 in mid-July this year reinforced the stock's medium-term uptrend. In the medium-term, the stock can rally to Rs 925, Rs 950 and Rs 983.

Conclusive breakthrough of resistance at Rs 983 will take the stock higher to Rs 1,100 and then to Rs 1,200 in the long-term. But, inability to surpass Rs 983 will pull the stock down to Rs 800. Significant supports below Rs 800 are positioned at Rs 750, Rs 700 and Rs 650.

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