BHEL poised at critical long-term support

I am a long-term investor in BHEL. I want to add more of these shares. At which price can I buy them for the short- to medium-term?

G.B. Rajeswar Reddy

BHEL (Rs 198): If you are contemplating buying BHEL for the short- to medium-term investment horizon, it is positioned at an apt juncture. The stock had a torrid time since October 2010, forming lower troughs and peaks. But the silver lining is that it is halting now at Rs 200. This level occurs very close to the 61.8 per cent retracement of the structural uptrend from the 2002 low.

The sanctity of the Rs 200 support has also been compounded by the fact that the stock reversed from this level in October 2008 and again, more recently, in May 2012. Investors with short- to medium-term perspective can buy the stock at this point with stop-loss at Rs 180. A bounce back from here can take the stock higher to Rs 220 or Rs 320 over the medium-term.

The stock is also poised at a critical juncture from a long-term view point.

This is in fact the last bastion for long-term investors. But a firm move above Rs 320 is needed to signal that the worst is over and the stock is headed towards Rs 370 or Rs 410.

Please advise the medium-term outlook for Advanta India and BEML?

Pankaj

Advanta India (Rs 1,023.8): Advanta India hit a nadir at Rs 209 in May 2011 following a deep decline from the Olympian heights of Rs 1,873 recorded in January 2008. The stock is in a steady uptrend since this low.

The long- as well as medium-term outlook for this stock is currently up.

But investors need to exercise caution at this juncture since the stock hit the long-term resistance at Rs 1,250 in early March and is currently pausing just below this level. The stock could find it difficult to surpass this hurdle just yet.

It is likely to spend some time in the zone between Rs 850 and Rs 1,250 before attempting to move above this ceiling.

Stop-loss for medium-term investors should, therefore, be at Rs 820.

Decline below this level will imply that the stock could move down to Rs 600 or even lower in the months ahead. Investors wishing to purchase this stock can wait for a breach of Rs 1,250 before doing so.

BEML (Rs 186.3): BEML is being sucked lower in a vortex of selling, pulling the stock below its long-term support at Rs 280. It is best to avoid purchasing this stock at this point. Those holding the stock are also advised to switch to some other stock.

The stock is currently at a multiyear low. Next support levels on the long-term chart are at Rs 96 and Rs 56. The stock needs to record a close above Rs 450 to signal that it is on the road to sustained recovery. Key medium-term hurdle is at Rs 600.

According to your analysis of Kennametal India on September 2, 2012, the stock had support at Rs 560. This level is now breached. What is your view now?

Devendra Sarda

Kennametal India (Rs 480.9): Kennametal India does have critical long-term support around Rs 560. This level occurs at 61.8 per cent retracement of the long-term uptrend from the February 2009 low. But there is no need to panic just yet. The stock is attempting to halt in the zone between Rs 460 and Rs 480. This is the next retracement support. It also coincides with the trough formed in February 2011.

You can hold the stock as long as it trades above Rs 450. But it will be best to switch out of this stock on decline below this level, since the next support is quite some way off at Rs 326.

Medium-term hurdles for the stock will be at Rs 600 and Rs 760. Medium-term view will turn positive only on close above Rs 760. Subsequent targets are Rs 850 and Rs 980.

Please advise on the outlook of Suprajit Engineering and Indoco Remedies. Can I buy these stocks at current levels?

Subir

Suprajit Engineering (Rs 33): The long-term trend in Suprajit Engineering is still pointing northwards. But the stock is in a medium-term correction since the peak formed at Rs 39 this January. If this is the onset of a long-term corrective wave, the stock could decline to Rs 26 in the months ahead. Investors with long-term perspective can use such declines to buy the stock with stop-loss at Rs 25.

Purchasing the stock with long-term perspective is, however, not advised if the stock declines below Rs 25. That would imply a propensity to move lower to Rs 21.8 or Rs 17.5.

The support that medium-term investors need to watch out for is at Rs 30. If the stock holds above this level, it means that the stock will make an attempt to move beyond Rs 40 in the weeks ahead.

Indoco Remedies (Rs 62.8): Indoco Remedies is also in a structural uptrend since the 2009 low. But the stock is moving in a protracted sideways range between Rs 50 and Rs 75 since December 2010. The long-term view will turn negative only on a strong weekly close below Rs 50. That said, the area around Rs 75 can continue to thwart up-moves over the next year. Target on break above Rs 75 is Rs 88.

Investors with short- and medium-term investment horizon can buy this stock with stop-loss at Rs 55. Fresh purchases are not advised below this level.

(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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