Market Strategy

Query Corner

Lokeshwarri S.K. | Updated on March 13, 2018 Published on December 21, 2013

Please let me know the prospects of Hindustan Unilever.

S. Krishnan

Hindustan Unilever (Rs 567.9): Hindustan Unilever has been in a structural uptrend since the trough of Rs 218 formed in March 2010. But a serious correction of this entire up-move from Rs 218 to Rs 718 appears to be unfolding currently.

This correction has strong supports at Rs 580, Rs 553 and Rs 530. The stock is currently halting in this zone.

Reversal from this region is a positive for the long-term prospects of the stock. HUL can then move in the trading band between Rs 530 and Rs 700 for a few more months before break to a new high.

That said, decline below Rs 530 will mean that the long-term trend can deteriorate to take the stock lower to Rs 468 or Rs 410.

I am holding SpiceJet bought at an average price of Rs 40. Please let me know whether I can book loss now or wait.

Jai Ram

SpiceJet (Rs 17.1): You have purchased the SpiceJet stock close to its recent peak at Rs 50.9 formed in December 2012. The stock is down 68 per cent from this peak. But there is no point in exiting the stock at this juncture since it is positioned close to its long-term supports at Rs 15.3 (formed in December 2011). You can hold the stock as long as it trades above Rs 15.

Reversal from here can make the stock rise to Rs 29, Rs 37 or Rs 50, where investors can contemplate an exit. Long-term view will, however, turn positive only if the stock rallies above Rs 50. Subsequent targets are Rs 66 and Rs 88.

Inability to move above Rs 50 will keep the stock vacillating in the zone between Rs 15 and Rs 50 for a few more months. Support on the long-term chart, below Rs 15, is at the 2008 trough at Rs 9.

I hold shares of Raymond bought at Rs 480. I would like to know the medium-term view of this stock. Can I average at current price?

G. Mohan

Raymond (Rs 286.2): Raymond has been in a deep decline since the peak of Rs 489 recorded in December last year. You have purchased the stock close to this medium-term peak. It will take some time for the stock to return to your purchase price.

For, it will encounter resistance at Rs 300 and Rs 371 in the months ahead. It is advisable to divest your holding close to these levels.

The stock is currently struggling to move above the first resistance at Rs 300. This implies that the medium-term view remains weak for the stock. It is, therefore, not advisable to average the stock at this point. Investors can hold it as long as the stock trades above Rs 175.

The stock could spend some more time in the range between Rs 175 and Rs 300. But, as long as the hurdle at Rs 300 is not crossed, the risk of a decline below Rs 175 to Rs 142 or even lower remains open.

Key long-term resistance band is between Rs 415 and Rs 490.

This band needs to be surpassed to pave the way for a rally to Rs 625.

I bought shares of Helios and Matheson at Rs 80. Please let me know the medium- and long-term outlook for the stock.

Harish

Helios and Matheson (Rs 111.9): This stock has been in a long-term uptrend since the trough at Rs 23 recorded in August 2012. But, this rally has taken the stock to a critical long-term resistance at Rs 114. This occurs at 38.2 per cent retracement of the stock’s decline from the January 2006 peak. A reversal from this level can drag the stock down to Rs 80 or Rs 60 in the months ahead.

Investors can, therefore, book some profit at this level and hold the rest with stop-loss at Rs 84. Subsequent supports are Rs 70 and Rs 58.

Long-term target on a break above Rs 114 are Rs 143 and Rs 172.

Please advise me on the long-term prospects of Bharat Electronics.

Vasanthi

Bharat Electronics (Rs 996.9): Key long-term support for Bharat Electronics is at Rs 1,200. The stock tried to form a base at this level between June 2012 and 2013. But, there was an emphatic move below this support in July this year, confirming that the long-term outlook has reversed lower for the stock.

Short-, medium- as well as long-term trends are currently down for the stock. But, it is taking support at the opening point of the gap formed in May 2009, at Rs 1,014. Since Rs 1,000 is also a psychological support, the decline can gain momentum once this level is breached. The stock is currently hanging on to this support by the skin of its teeth. Next support on the long-term chart is at Rs 815.

Key resistance levels for the medium-term are at Rs 1,200, Rs 1,375 and Rs 1,483. Long-term view will turn conducive only if the stock records a strong close above Rs 1,485.

I am a long-term investor feeling tempted to buy Corporation Bank at these levels. I request you to advise whether this is the right time to enter into this stock.

Dev Pai

Corporation Bank (Rs 259.9): This is not the right price to buy Corporation Bank from a long-term perspective. The stock has breached its key long-term support at Rs 400 and spiralled lower to the recent low at Rs 240. The point of concern is that there is no strength in the reversal that was witnessed in November and the stock is once more turning southward. If the support at Rs 240 is breached, return to its 2009-low at Rs 155 cannot be ruled out.

It would be best to wait for a weekly close above Rs 350 before purchasing the stock. That is the medium-term trend decider for the stock. Subsequent hurdles are placed at Rs 400 and Rs 500.

Lokeshwarri S.K.

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