Market Strategy

Query Corner: Long-term view remains positive for Cipla

Lokeshwarri S.K. | Updated on October 19, 2013 Published on October 19, 2013

I had bought 100 shares of Cipla at Rs 331. According to your analysis published on July 7, 2013, Cipla is in a long-term uptrend. It also closed above Rs 430. Is there a possibility of it reaching Rs 500 in the long term?

Devendra Sarda

Cipla (Rs 415): There is no alteration in the long-term view of this stock. In July this year, it was mentioned in this column that sideways move between Rs 350 and Rs 420 would be a positive from a long-term perspective. It was also indicated that investors need to fret only if the stock closes below Rs 320.

We retain the view while adjusting the supports slightly to account for recent price moves.

Cipla has reversed lower from the September peak of Rs 450. But the cut is not deep enough to cause any consternation.

Medium-term support is placed in the band between Rs 330 and Rs 340. As long as the stock manages to hold above this zone, the possibility of a break-out to Rs 500 remains open.

But a decline below Rs 330 will drag the stock lower to Rs 297 or Rs 260. Long-term trend will reverse lower only on a strong close below Rs 260.

I am new to the stock market. I purchased a small quantity of Arvind Textiles at Rs 75. The stock has gone up to Rs 100 within two months. I want to know if I need to hold the stock for a longer period or sell it during a bullish phase.

Ranjith Kumar

Arvind (Rs 100): You have already made a 33 per cent return on the stock in two months.

If annualised, the returns are around 200 per cent. A long-term investor should be one who plays for large returns.

Whether it is achieved over two months or over two years ought to be immaterial. If you are determined to hold the stock for two years, since you are a long-term investor, you could lose money as the stock could fall by half from your cost price at the end of the period.

In short, book at least partial profits on your position or hold the stock with a suitable stop-loss so that a bulk of the profit is protected.

Arvind has strong resistance in the band between Rs 100 and Rs 110. The stock has already made three attempts to get past this level in October 2011, February 2012 and January 2013.

Since the stock is once again approaching this hurdle, you can cash out some of the profits and hold the rest with a stop-loss at Rs 88.

Consider re-investing if the stock closes above Rs 115. The next target is Rs 140.

Key long-term support for the stock is placed at Rs 62. Investors can buy the stock in declines with a stop-loss at Rs 61.

Please provide technical outlook of Hindalco.

Keval Shah

Hindalco (Rs 114): The long-term trend in the stock turned negative in January this year as the stock declined below the support at Rs 100. But Hindalco has been able to reverse higher from Rs 85. Immediate hurdles for the stock are positioned at Rs 120 and Rs 140.

Inability to move above these levels will mean that the short-term outlook remains bleak with the possibility of a move lower to Rs 85 or even below in the coming months.

Medium-term resistance for the stock is placed at Rs 148, Rs 165 and Rs 187. The stock might not be able to surpass the resistance at Rs 187 just yet.

Let me know the prospects of Karur Vysya Bank.

S. Manikandan

Karur Vysya Bank (Rs 336): The key long-term trend-deciding level for Karur Vysya Bank is positioned at Rs 272. The sharp decline in the stock price since this May halted above this support level in August and the stock is attempting to stabilise itself in the zone between Rs 300 and Rs 350.

Investors holding the stock can continue to do so as long as it trades above Rs 270. Investors should, however, desist from making fresh purchases if the stock declines below Rs 270.

Medium-term resistances for the stock are present at Rs 400 and Rs 462.

Strong move above Rs 462 will imply that the stock is heading towards its life-time high at Rs 592.

Can I buy IOC at current market price?

K. Kasi Nathan

IOC (Rs 199): Attempting to buy IOC at this juncture is like catching a falling knife. The short-, medium- as well as the long-term trends are down for the stock.

The stock made a low at Rs 186 in August this year, but the recovery from this level was far from convincing. A breach of this level will drag the stock towards its long-term support at Rs 150.

Investors can consider buying the stock in the support zone between Rs 150 and Rs 180.

This zone has supported the stock multiple times, in 2004, 2006 and in 2008.

Medium-term resistances are placed at Rs 260 and Rs 305.

Investors who like to play it safe should wait for a move above Rs 260 before buying the stock.

(Readers can send in their queries, on not more than two companies, to > 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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