Query Corner: BHEL reversing from long-term support

Please advise one-year target for TAJGVK Hotels.

Raphael

TAJGVK Hotels & Resorts (Rs 72.3): TAJGVK Hotels is in long-term decline since May 2006 when the stock recorded the peak of Rs 344. Though there was a strong rebound in the stock in 2009, it could not retrace even 50 per cent of the previous decline implying that the long-term outlook remained under a cloud.

The stock has long-term support at Rs 35. It is currently attempting to reverse higher from a slightly higher level at Rs 55. But the recovery thus far is not convincing enough. It is to be seen if the stock manages to ride above Rs 105 in the months ahead. Failure to do so will mean that the stock will fall again towards the long-term support at Rs 35.

Targets on a strong move above Rs 105 are Rs 117 and Rs 132. The stock will face strong long-term hurdle in the zone between Rs 180 and Rs 190. The stock is likely to remain in a broad trading band between Rs 50 and Rs 135 over the next 12 months.

Please give your views on Assam Company for the next two years.

R. Joseph

Assam Company (Rs 7.2): This stock is currently trading close to its multiyear lows. There is feeble support in the zone between Rs 5 and Rs 6.5. Investors still holding the stock should continue to do so only as long as it trades above Rs 5. But those wanting to buy the stock should wait for a move above Rs 14. Subsequent targets are Rs 17.5 and Rs 20. Long-term hurdle for the stock is at Rs 30.

Please advise on Bajaj Hindusthan purchased at Rs 34 and BHEL at Rs 206. I am a long-term investor.

Prashant Satoskar

Bajaj Hindusthan (Rs 27): Bajaj Hindusthan is in a severe downtrend since the peak of Rs 480 recorded in April 2006. What is of concern is that the stock was unable to build on the rebound in 2009 and slid lower to hit a nadir at Rs 23 last December. It has not made any headway since then, vacillating in a narrow band between Rs 23 and Rs 37.

Long-term investors should hold the stock only as long as it trades above Rs 23. It is hard to identify where the stock can halt once it declines below this level.

That said, the stock needs to do lot more work before it can be pronounced safe from a medium-term perspective. Strong weekly close above Rs 100 is required to signal a reversal in the medium-term trend. Subsequent targets are Rs 115 and Rs 137.

BHEL (Rs 224.6): The secular uptrend in BHEL began before most other stocks, from the year 2000. If we consider this long-term uptrend that unfolded between 2000 and 2007, 61.8 per cent retracement, that is an important Fibonacci level, occurs around Rs 200. In other words, the stock needs to close below Rs 200 to signal that the long-term uptrend has reversed downwards.

The stock formed a significant trough at Rs 197 in October 2008 before rallying to Rs 500. You have purchased the stock at an important juncture. Do hold on with stop-loss at Rs 150. Decline below this level will, however, spell trouble for BHEL.

Resistances for the months ahead would be at Rs 326, Rs 370 and Rs 408. Investors, who are not into the stock for the long haul, can exit the stock if it wavers around Rs 326. Failure to clear this hurdle will mean that the stock could remain under duress in the months ahead.

Could you please advise on the prospects of TTK Prestige? I have a few shares bought at Rs 3,900. Shall I hold it or sell out? If holding is advised, for how long? I can hold them for one year more, if there is a possibility of an uptrend above my buying price.

M.R. Subramanian

TTK Prestige (Rs 3,349.2): You have purchased TTK Prestige close to its lifetime peak. The stock formed double-top around Rs 3,996 and is in a corrective mood now. But the stock is in a stellar long-term uptrend since 2009 and this uptrend will be threatened only on a close below Rs 2,500. Long-term investors can use declines to buy the stock with stop at Rs 2,500.

Since your investment horizon is one year, you should hold the stock with stop-loss at Rs 2800. If the stock manages to hold above this level, there is the possibility of a breakout to Rs 4,100 or Rs 4,830 over the next two years.

Please give technical advise for long-term on SREI Infrastructure Finance.

Ayush

SREI Infrastructure Finance (Rs 33.6): This stock is in a long-term decline since the January 2008 peak at Rs 162. The rebound in 2009 and 2010 could not help the stock regain even half the losses suffered in the previous decline. A fresh leg of this decline dragged the stock down from 2010 peak of Rs 78 to Rs 19 in May this year.

The medium-term resistances for the stock would be at Rs 42 and Rs 56. Investors with short- to medium-term perspective can divest their holdings at either of these levels.

Long-term view will turn positive only on close above Rs 80. Failure to get past the long-term resistance zone between Rs 70 and Rs 80 will keep the stock in the range between Rs 10 and Rs 80 for a few more years.



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