Query Corner: GAIL in short-term downtrend

I am holding Insecticides India purchased at Rs 310. Please give me the possible targets and stop-loss for my trade with a six to nine month perspective.

Aryann

Insecticides India (Rs 296.8): This stock recorded its life-time high of Rs 346 recently. The uptrend that began from December 2008 continues to be in force and the long-term view will turn negative only on a close below Rs 200. This level can serve as stop-loss for long-term investors. Investors with medium-term horizon can hold with stop at Rs 250.

First long-term target of the uptrend from December 2008 is Rs 347. Since the stock is reversing lower from this zone, investors ought to tread a little carefully with their holdings. Target on a close above Rs 350 is Rs 470.



I purchased JP Associates at Rs 150. How long would I have to hold the stock to at least recover my cost? What is the future of Mahindra Satyam? I have bought it at Rs 100 per share.

Jaiprakash Associates (Rs 81.9): The last time we had visited the stock was in December 2010 when we had written that key medium-term support for the stock was at Rs 85. We had advised investors to stay away from this counter on a decline below this level since that would turn the medium-term view negative.

 The stock declined below the trend-deciding level of Rs 85 in the first week of February. But it is keeping everyone guessing since then, moving in a sideways range between Rs 75 and Rs 88. This narrow movement does not inspire much confidence and can be followed by decline to Rs 70 or even Rs 41.

 Investors should divest their holdings on a close below Rs 70 and consider re-entry on a close above Rs 110. Resistances for the next few months would be at Rs 117 and Rs 140.

  Mahindra Satyam (Rs 66.8): In our review of this stock last August, we had indicated that long-term view would turn negative only on a close below Rs 60 and this should be the stop-loss for long-term investors. The stock tested this level in December 2010 and is once more hovering just above this level.

We stay with the view that investors can hold the stock as long as it trades above Rs 60. However a decline below this level will drag the stock lower to Rs 43 or Rs 34 over the ensuing months.

Rallies will face resistance at Rs 82 and Rs 98. Investors with medium-term horizon can exit at either of these levels.

Can you explain the short and long-term support and resistance on GAIL?

Ajay Rao

GAIL (Rs 442.4): GAIL is one of the stocks that managed to retain their long-term up-trends in the 2008 crash. The stock retraced only 61.8 per cent of its long-term uptrend from 2001 lows in that period and the third leg of this structural uptrend appears to have begun in the first quarter of 2009. Simple extrapolation targets of this uptrend are Rs 405 and Rs 600. Since the stock has already moved above the first target, it can attempt to move towards the second in the long-term. Investors with long-term perspective can hold the stock with stop-loss at Rs 330.

Short-term trend in the stock is down but it will receive support around Rs 400 if the down-move persists in the ensuing weeks. Short-term resistances are at Rs 492 and Rs 536.

Please tell me the prospects of Thomas Cook India bought above Rs 70 a few months back.

Chidambaram Kudiarasu

Thomas Cook (Rs 45.5): Thomas Cook continues in a long-term down trend. The stock faces strong resistance in the zone between Rs 70 and Rs 80. It made three attempts to get past this zone between June 2009 and September 2010 before reversing lower. Strong move above Rs 80 can take the stock to Rs 95. But the stock needs to record a weekly close above this level to signal a reversal in the long-term view.

It is a matter of concern that Thomas Cook has breached the key medium-term support at Rs 48. It is however attempting to stabilise just below this buttress. Investors can therefore hold the stock with stop at Rs 42. Decline below this level will spell trouble and signal the propensity to fall to Rs 40 or Rs 30 over the ensuing months.

Resistances for the weeks ahead would be at Rs 56, Rs 64 and Rs 78.

Will you please advice on Andhra Sugar brought at Rs 130 with a 1 year perspective?

Suneel

Andhra Sugar (Rs 88.2): This stock faces long-term resistance in the band between Rs 140 and Rs 160. It reversed lower from this zone in January 2008 and then again in September 2009. This ceiling thwarted the stock recently in September 2010 too and it is currently in a medium-term correction since the peak of Rs 145. Key support that investors need to watch now is at Rs 90. Decline below this level will open the flood-gates of selling, dragging the stock down to Rs 82 and then to Rs 60.

Investors should therefore divest their holdings on weekly close below Rs 80. Resistances for the upcoming months will be at Rs 110 and Rs 124.

I have purchased Ingersoll-Rand at Rs 474. Please advise about its medium-term prospects. Should I buy more?

R.R. Chablani

Ingersoll-Rand (Rs 410): Ingersoll-Rand is in a down-trend since the peak of Rs 532 recorded in November last year. This down-move is halting at the significant support around Rs 400. The zone between Rs 400 and Rs 440 acted as a strong barrier for rallies between 2006 and 2008. Investors with medium-term perspective can hold the stock as long as it holds above Rs 380. Fresh purchases are not recommended on a decline below this level.

Subsequent supports are at Rs 354 and Rs 318. Long-term view will turn negative only on a close below the second support. The stock will continue to face resistance at Rs 500. Long-term target on a close above Rs 500 is Rs 608.



Please tell me technical view on Kilpest India.

Mangesh C.V.

Kilpest India (Rs 27.8): Kilpest India is one of the stock that is not recommended for the faint-hearted. The stock lost 86 per cent from its peak value in the first three months of 2008. Though the stock did try to claw its way higher, it needs to record a weekly close above Rs 50 to signal that the medium-term trend is turning positive.

Immediate resistances will be at Rs 30 and Rs 34. Strong close above Rs 34 will imply that the stock can make a dash towards Rs 50. Supports that investors can watch out for are at Rs 21 and Rs 16.

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