Portfolio

Query Corner - Sun Pharma in structural uptrend

Lokeshwarri S.K. | Updated on July 21, 2011 Published on July 16, 2011

Please let me know the prospects of Jammu and Kashmir Bank?

R.M. Rajendran

Jammu and Kashmir Bank (Rs 858.5): This stock peaked in the zone between Rs 900 and Rs 970 in January 2008. This hurdle thwarted the stock's up-move in November as well and the stock is in a sideways consolidation move since then. It will receive critical medium-term support at Rs 704 and Rs 664. Investors can continue to hold the stock as long as it trades above this level.

Continued movement in the zone between Rs 670 and Rs 950 will be positive from a long-term perspective and can usher in a rally to Rs 1,120 over the long-term.

That said, investors with medium to short-term perspective should exit their holding on a close below Rs 670. Subsequent targets are Rs 576 and Rs 490. The long-term view will reverse lower only on a close below the second target.

Please provide me with an analysis on Power Finance Corporation (PFC).

S.P. Rajasuriya

PFC (Rs 211.2): Investors in Power Finance Corporation would have undergone a traumatic period since last October as the stock lost over 50 per cent from its all-time high of Rs 383.

The stock has moved below its key medium-term support at Rs 204 to record the recent low at Rs 168.

The recovery from this trough is not strong enough and the short as well as medium-term trends in the stock are currently down.

The short-term view will turn positive only on a strong close above Rs 250. Subsequent medium-term resistances are at Rs 276 and Rs 300.

Inability to move above Rs 250 will mean that the stock can head lower to Rs 150 or Rs 125 over the ensuing months. Investors with lower penchant for risk can exit the stock at current level and consider re-entry on a close above Rs 250.

I have purchased Wipro at Rs 490 and Sun Pharma at Rs 494 in January. What are the support and resistance levels for the short and medium-term?

K.K. Shah

Wipro (Rs 414.6): Wipro was in a structural down-trend since March 2007 and this move made the stock lose around 70 per cent from its high of Rs 378. The fortunes for this stock, however, reversed along with the rest of the market in March 2009 and the stock has not looked back since then. It moved beyond its previous high to record a new life-time high at Rs 500 last October.

The stock is however struggling to move above the peak at Rs 500 and it has recorded a tripe-mountain formation since last October in the weekly chart. This is a top reversal pattern and the downward target according to this pattern is Rs 300.

If we consider Fibonacci retracement levels of the up-move from the March 2009 low, we get the downward targets at Rs 350, Rs 308 and Rs 263 over the medium-term. Investors with a short to medium-term perspective should therefore divest their holdings on a close below Rs 400.

However, continued movement in the band between Rs 400 and Rs 500 will denote strength and the propensity to move higher to Rs 636 over the long-term.

Sun Pharmaceutical Industries (Rs 505.3): Sun Pharma is one of those rare stocks where the 2008 crash hardly made a dent.

The long-term uptrend was retraced only 38.2 per cent of the up-move from 2003 in that crash. The stock has not looked back since the reversal in March 2009 and recorded a new life-time high last week.

The stock is currently perched 67 per cent above its previous peak at Rs 310 recorded in September 2008. This will now be a key long-term support for the stock and investors with long-term perspective can hold it as long as it trades above this level.

In the short-term, the stock faces resistance around Rs 500.

Failure to penetrate this level can result in the stock moving in the sideways band between Rs 390 and Rs 520 over the ensuing months. The lower boundary of this range can act as stop loss for medium term investors. Target on a break above Rs 520 is Rs 590.

Please provide the technical view on LML. I am holding this stock for last couple of years.

T. Arun

LML (Rs 10.7): LML is in a structural downtrend since December 2003 and it has been plumbing new depths since then.

Recovery from the Mach 2009 low of Rs 5 is hardly inspiring.

Short-term resistances for the stock are at Rs 19 and Rs 28. Investors holding the stock should divest the stock on rallies to either of these levels.

It is hard to envisage a move above Rs 28 any time soon.

I have bought HDFC Bank at Rs 2,378. Should I continue to hold this stock? Also what is your view on Indusind Bank?

Sundaresan

HDFC Bank (Rs 509): Please note that post-split, your cost price is Rs 476. This stock is in a stellar up-move since the first quarter of 2009 and the stock is currently poised at a new life-time high, well above its 2008 peak.

The stock will face resistance in the zone between Rs 500 and Rs 520 in the near term.

Inability to move beyond this resistance over the ensuing months will mean that the medium-term movement of the stock will be sideways in the range between Rs 400 and Rs 500.

Investors with medium-term perspective can hold the stock with stop at Rs 400. Long-term investors can hold with deeper stop at Rs 365. Subsequent supports are at Rs 330 and Rs 290.

Long-term target on a strong breach of Rs 520 is Rs 614.

Indusind Bank (Rs 278.8): Indusind Bank is also edging close to its previous high of Rs 309 recorded last December.

The stock is, however, in sideways correction in the range between Rs 200 and Rs 300 over the last eight months.

This sideways move can prolong for a few more months as the stock remains shackled within this range. Investors can hold the stock with stop at Rs 195. Strong weekly close below this level can drag the stock to Rs 168 or Rs 135 over the medium-term.

However, if the stock manages to hold above Rs 200, it will be positive from a long-term perspective and will imply that it can move higher to Rs 374 over the long-term.

Let me have your views on Lakshmi Precision Screws purchased at Rs 38.

Ramachandra Bhat

Lakshmi Precision Screws (Rs 50.3): The long-term downtrend in this stock resumed from the August 2010 peak and the stock is once again slithering and sliding. It is currently attempting to hold above the key medium-term support at Rs 44. Investors should exit the stock if it declines below this level since subsequent targets are Rs 36, 32 and 26.

Resistances for the days ahead would be at Rs 60 and Rs 70. Investors can cash out on rallies to either of these levels.

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