Query Corner: Deepak Fert reversing higher from support level

I have some shares of Bank of India purchased at an average price of Rs 147. Please suggest whether I should hold it for the short-term or sell.

Ravi P.V.

Bank of India (Rs 170): If you have bought the shares of Bank of India from a short-term perspective, you can hold the shares with stop-loss at Rs 125. Bounce from here can take the stock higher to Rs 190 or Rs 230 over the medium-term where you can consider exit. Key medium-term resistance for the stock exists at Rs 260 and the stock could have trouble moving above this level over the next twelve months, at least.

Investors need to note that the long- and medium-term trend in this stock is extremely weak. The stock has breached its 2009 low at Rs 190, signalling a long-term reversal. The rebound seen over the last couple of weeks has to take the stock above Rs 190 before the outlook turns positive.

It is best to divest your holding on decline below Rs 125 since the next supports are way below at Rs 100 and Rs 80.

Let me know the prospects of Carborundum Universal.

S. Manikandan

Carborundum Universal (Rs 105): This stock is currently halting at a key support level that occurs at 61.8 per cent retracement of the rally from the 2009 low. Despite the halt, we cannot assume that the decline from the Rs 175-peak has ended at this point.

The reversal thus far does not assure us on that count.

Investors with a medium-term perspective can hold the stock with stop-loss at Rs 95. Stop-loss for long-term investors can be deeper at Rs 85. Decline below Rs 85 will mean that the long-term trend has reversed lower in the stock. Investors should, therefore, keep away, should that happen.

Medium-term resistances are placed at Rs 117 and Rs 130. Investors with short- to medium-term investment horizon should exit the stock if it struggles to move above these levels.

Subsequent resistances are at Rs137 and Rs 147.

Let me know the long-term prospects of Hindustan Zinc and Hindustan Copper.

Rajagopalan J.

Hindustan Zinc (Rs 125.9): The long-term trend in Hindustan Zinc continues to be up. The uptrend that began in 2009 continues to be in force. Despite the stock being in a correction since April 2011, this correction is evolving into a sideways move in the range between Rs 100 and Rs 155. Long-term investors can hold the stock with stop-loss at Rs 90. The stock can also be bought in declines with the same stop.

Medium-term resistances are at Rs 133 and Rs 150. The long-term hurdle for the stock is at Rs 155. Minimum long-term target, once this level is crossed would be Rs 180.

Hindustan Copper (Rs 66.3): Technical analysis should not be applied to stocks with low volumes since this kind of analysis is pegged to the behaviour of the investors. Low floating stocks such as Hindustan Copper have few investors trading on the counter at any given point leading to distorted price action.

This is evident from the extremely volatile long-term chart of this stock, with the stock price swinging between Rs 80 and Rs 650.

The lower band of this range was breached in July this year and the stock is currently trading at levels last seen in 2006.

Next long-term support is at Rs 42 and this should serve as a stop-loss for investors who are still holding this stock.

Key medium-term resistance for the stock is at Rs 150. Failure to move above this level will result in the stock moving in a range of Rs 50 and Rs 150 for a few more months. Targets above Rs 150 are at Rs 215 and Rs 320.

Can I accumulate Reliance Industrial Infrastructure at current levels?

K. Kasi Nathan

Reliance Industrial Infrastructure (Rs 316.4): If you want to buy the stock only from a trading perspective, go ahead and buy the stock with stop-loss at Rs 300. Reliance Industrial Infrastructure is stuck in an extremely narrow band between Rs 300 and Rs 430 since March. You can target Rs 400 or Rs 430. It needs to be borne in mind that the stock is in a severe bear trend since May 2009 with every rally bringing forth a fresh bout of selling.

Though the stock could move higher to Rs 460 or Rs 550 over the medium-term, these could be shortlived flourishes. We need to see a strong weekly close above Rs 700 before concluding that a medium-term reversal is in progress.

Kindly advise me whether I can make fresh investments in Deepak Fertilisers at current market price for 12-24 month-time horizon.

Alok Varshney

Deepak Fertilisers (Rs 102.7): Deepak Fertilisers is certainly bouncing higher but it is not certain yet if this rally will sustain for the next 24 months. The level from which it is currently reversing higher, Rs 82, is a long-term support for the stock.

But only investors with a greater penchant for risk can buy the stock at current levels with stop-loss at Rs 78. Decline below Rs 78 can make the stock head to Rs 70 or even lower.

Those who like to play it safe can wait for a firm close above Rs 132 before buying the stock. This level needs to be overcome to signal that the stock is rising to Rs 148 or even Rs 163.

(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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