QUERY CORNER - Cipla in a strong structural uptrend

What are the medium- and long-term prospects of Alok Industries and Hexaware?

S. Gupta

Alok Industries (Rs 10.9): The trends along all time-frames are down in Alok Industries. The stock faces strong long-term resistance in the band between Rs 35 and Rs 45. It reversed down from this zone in November 2010. The stock is currently testing its long-term support base around Rs 10.

Long-term investors should stay wary now since move below Rs 10 will spell trouble. It will be best to divest your holdings on a move below this level. Medium-term resistances for the stock would be at Rs 20 and Rs 25. Investors with short-term investment horizon can divest their holdings at either of these levels.

Hexaware Technologies (Rs 86.3): This stock recorded a strong rally in the first nine months of 2012 as it raced from Rs 73 to Rs 142. But there has been a steep correction thereafter and the stock is in a free fall over the last three months. Key long-term supports for the stock are at Rs 76 and Rs 60.

Long-term investors can hold the stock as long as it trades above this level. Resistances will be at Rs 107 and Rs 120. The stock needs to move above Rs 120 to signal the intent to move on to a new lifetime high.

I have bought Cipla at Rs 383. Please give your outlook for this stock from 2 to 3 months perspective.

Sathya

Cipla (Rs 418.9): Cipla is in a strong structural uptrend. It faced resistance around Rs 360 and struggled to clear this level and made multiple peaks here between December 2009 and February 2012.

The stock cleared this obstacle in August this year. This level will now turn in to a reliable support for medium-term investors.

You can, therefore, hold the stock as long as it trades above Rs 350. Third part of the long-term up-move that began from October 2008 low is currently in motion.

This move has the next long-term target of Rs 501. But the stock might not be able to run towards this level immediately. It is likely to spend some months consolidating in the range between Rs 350 and Rs 450.

Long-term investors can hold the stock with stop-loss at Rs 300.

Please let me know the trends in NTPC and Jaiprakash Associates.

K.V. Gopal

NTPC (Rs 153.1): NTPC is currently struggling to save itself from a long-term downtrend. The stock has key long-term support zone in the band between Rs 140 and Rs 160. The stock formed a trough at the lower end of this band in May but the uptrend could not take the stock far and it is once again drooping down.

Investors with short- to medium-term perspective can hold the stock only as long as it trades above Rs 140.

Decline below this level will drag the stock lower to Rs 130 or Rs 113.

The second level can serve as the support for long-term investors.

Key resistances for the medium-term are at Rs 180 and Rs 203. Long-term resistances are positioned at Rs 240 and Rs 290.

Jaiprakash Associates (Rs 96.6): This stock is in a steady uptrend since the beginning of 2012. The stock has doubled in price since this low, and the sequence of higher peaks and troughs formed since then is also heartening.

That said, the stock is currently testing its key medium-term resistance at Rs 100. This is also a psychological resistance for the stock.

Reversal from this level can keep the stock in the range between Rs 50 and Rs 100 for a few more months. Fresh purchases are, therefore, advised only on close above Rs 100. Subsequent targets are Rs 116 and Rs 131. Key long-term resistance for the stock is positioned in the zone between Rs 150 and Rs 180.

The long-term base for the stock is between Rs 30 and Rs 50.

Please advise on the outlook for Lakshmi Vilas Bank and Karur Vysya Bank.

R.M. Kumarappan, Saravanan

Lakshmi Vilas Bank (Rs 102.3): This stock is reversing higher from key long-term support band between Rs 70 and Rs 78. Long-term investors can hang on to this stock as long as it trades above Rs 70. Stop-loss for medium-term investors can be higher at Rs 95.

Investors with short-term horizon should, however, tread cautiously at these levels since the stock is approaching key medium-term resistance at Rs 115. Inability to move above this level will result in the stock reversing lower to Rs 85 or even Rs 70 in the months ahead.

Long-term target on move above Rs 115 is the previous peak at Rs 138.

Karur Vysya Bank (Rs 508.7): Karur Vysya Bank is one of the strong performers in 2012, moving up from the yearly low of Rs 345 to gain almost 50 per cent. Investors, however, need to be bit watchful at these levels since the stock has long-term resistance around Rs 500. The stock had peaked at Rs 508 in September 2010 and gone in to a deep correction from there.

The stock is once again close to this resistance level and testing it. Strong close above Rs 550 is needed to signal a long-term breakout. Else the stock can decline to Rs 460 or Rs 415 in the months ahead.

Long-term target on break above Rs 500 is Rs 580.

(Readers can send in their queries, on not more than two companies, to > techtrail@thehindu.co.in Queries can also be sent by post to: Tech Trail, 859/860 Kasturi Buildings, Anna Salai, Chennai 600002. We would endeavour to answer as many queries as possible. However, constraints of space will limit the responses featured under this column.)

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