Query Corner: Bombay Dyeing hovering above key support

What is your advice regarding medium- and long-term outlook on Wockhardt and Cadila Healthcare? Can these stocks be bought at the current levels?

Anil Kumar Ray

Wockhardt (Rs 1,229.7): This stock has received a sharp cut since May 15, making the stock lose more than a third of its value. The long-term trend in the stock continues to be up. Close below Rs 1,000 is needed to reverse this trend.

But the ferocity of the current downtrend makes it quite likely that the stock could be testing the key support around Rs 1,000 soon. Breach of this level will take the stock to the next supports at Rs 540 and Rs 415.

It is quite likely that an important leg of the up-move has been completed at the March peak at Rs 2,166. The stock will find it difficult to move on to a new high over the next 12 months. Sideways move between Rs 1,000 and Rs 2,000 is more likely in this period.

Cadila Healthcare (Rs 793.6): This stock had a spectacular up-move from the low of Rs 148 in December 2008 to Rs 983 in July 2011. The stock is in a consolidation phase since then. This phase is making the stock move sideways in the band between Rs 650 and Rs 1,000.

Long-term investors can, therefore, stay put as long as the stock trades above Rs 600. Declines can also be used to buy the stock with the same stop-loss. But breach of this support will mean that the stock is heading towards Rs 565 and Rs 465.

Medium-term hurdles will be at Rs 900 and then at Rs 1,000. It could be some time before the stock breaks out above Rs 1,000. Once it does so, next target would be Rs 1,200.

What are the prospects of Financial Technologies over the next 2-3 years according to technical analysis?

Arun Paturkar

Financial Technologies (Rs 798.2): Financial Technologies is stuck in a broad sideways band between Rs 500 and Rs 1,700 since March 2009. These boundaries can shackle the stock over the next two years too. Long-term supports for the stock exist at Rs 520 and Rs 420. Long-term investors can hold the stock as long as it trades above the second support.

That said, the stock faces resistance at Rs 1,266 and this level can be a serious hurdle in the coming months. Long-term resistances based on Fibonacci retracement levels are at Rs 1,750 and Rs 2,050.

I am holding shares of Royal Orchid Hotels purchased at Rs 65 and Tinplate Company bought at Rs 60 for the last five years. Should I exit or hold?

Ram Kumar Shiroha

Royal Orchid Hotels (Rs 27): It would be best to exit the stock of Royal Orchid Hotels. The stock is currently in a severe downtrend. It has also breached its long-term support at Rs 40 and currently trades at a new lifetime low. It is hard to forecast where the stock’s next halt can be.

Those who wish to repurchase the stock can do so once it moves back above Rs 40. As long as the stock trades below this level, it will be best to stay away from it.

Tinplate Company (Rs 41.8): Tinplate Company is in a downtrend since the peak at Rs 57 hit in August 2012. But the stock is still holding above its long-term support at Rs 32. You can hold the stock with stop-loss at Rs 31.

The stock can rise to Rs 51 or Rs 58 over the medium-term and investors can consider exiting the stock in such rallies. The stock, however, faces long-term resistance at Rs 57. Inability to move beyond this level will keep the stock in the range between Rs 30 and Rs 60.

Long-term view will turn positive only on a close above Rs 58, paving the way for rise to Rs 65 or Rs 72.

Please give your technical view on Bombay Dyeing for an 18-month investment span. Can I buy at the current price?

H.H. Shah

Bombay Dyeing (Rs 78.4): Bombay Dyeing is in a medium-term downtrend since the peak at Rs 140 recorded in January this year. But the stock has key long-term support at Rs 56 and Rs 68. The stock reversed from this zone twice in 2011. This support also occurs at 61.8 per cent retracement of the rally from the 2009 low.

If you are one of those investors with a high risk appetite, you can buy the stock with stop at Rs 52. Reversal from this zone can take the stock higher to Rs 115 or Rs 140 in the months ahead. The long-term outlook will, however, turn positive only on a close above Rs 140.

I have shares of Computer Maintenance Corporation bought at levels of Rs 1,400 in January. How much longer do I have to hold the stock?

G. Krishna Kumar

CMC (Rs 1,253.2): This stock has just begun a corrective phase. This decline can drag the stock lower to Rs 1,180 or Rs 1,100 in the months ahead. You can hold the stock with stop at Rs 1,075. If the stock manages to reverse from current levels, from the support zone around Rs 1,250, it will be a sign of strength and will mean that the stock can move higher to Rs 1,420 or Rs 1,500 in the medium-term.

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