Technical Analysis

ICICI Bank in intermediate downtrend

Yoganand D. | Updated on May 21, 2011 Published on May 21, 2011

Please explain the long-term prospects of Dhanlakshmi Bank.

Rohit

Dhanlakshmi Bank (Rs 126.8): Dhanlakshmi Bank had been on a long-term uptrend after it took support at its long-term base level of Rs 40 in March 2009 and recorded its life time high of Rs 212 in October 2010. However, the stock changed its direction subsequently and has been on an intermediate-term downtrend since then. The stock has a long-term support in the range between 95 and Rs 100 where it took support this February and reversed upward. Important resistance that investors need to watch out for is at Rs 140. Failure to move above this level would keep the stock consolidating sideways in the band between Rs 95 and Rs 140 in the medium-term.

That said, a strong tumble below Rs 94 will pull the stock down to Rs 60 and then to Rs 40 in the long-term. Conversely, a strong move above Rs 160 is required to reinforce the bullish momentum and take the stock higher to its subsequent resistances at Rs 180 and Rs 200 in the long-term.

Please let me have your opinion on REI Agro bought at Rs 21 and JM Financial at Rs 28.

Yamani Meherally

REI Agro (Rs 26.8): After bottoming around Rs 19 last August, REI Agro is gradually trending higher. However, the stock has been consistently encountering resistance at Rs 28.5 since last November. It is currently hovering below this key resistance. Investors can consider taking partial profits off the table if the stock fails to move above this resistance. In that case, the stock can decline to Rs 25 and then to Rs 22-23 range. Long-term investors can hold the stock with a deep stop-loss at Rs 22. Conclusive dive below Rs 22 will pull the stock to its August 2010 low of Rs 19 eventually.

However, an emphatic weekly close above Rs 28.5 will be a bullish indication and can lift the stock higher to Rs 31 and Rs 34 in the medium-term. Next important resistance is at Rs 42.

JM Financial (Rs 24.3): Since encountering key resistance at Rs 65 in June 2009, the stock resumed its long-term downtrend and has been trending down. The stock has significant longer-term support in the range between Rs 18 and Rs 20. In February, the stock took support from this base and started to move higher. However, the rally failed to sustain above Rs 34.

The stock is once again slipping towards the support zone. As long as this support holds, investors can consider holding the stock with stop-loss at Rs 19. Reversal up from the support can take the stock higher to its immediate resistance at Rs 30 or to 34. Only a strong move above Rs 34 will pave way for a rally to Rs 47 in the long-term. Conversely downward breakthrough of Rs 18 can pull the stock down to Rs 13 or even to Rs 7 in the long-term.

I bought shares of Ganesh Housing Corporation at Rs 274. Please advise whether I can hold it or sell it. I can wait for three months.

Prabha Sharma

Ganesh Housing Corporation (Rs 127.1): Key resistance at Rs 280 halted the stock's up move in October 2010; the up move had started from the March 2009 low of Rs 30. The stock subsequently, changed its direction and resumed its long-term downtrend that has been in place since January 2008 peak of Rs 830. Moreover, since last October, the stock has been on an intermediate-term downtrend. This down move has retraced 61.8 per cent Fibonacci retracement level and the stock is currently testing its long-term support band between Rs 120 and Rs 130. Investors should divest their holdings on a conclusive decline below this support as the downside risk is high. A strong decline below this support can drag the stock down to Rs 100 and then to Rs 66 in the long term.

The stock has significant resistance at Rs 150. Inability to move above this level will confine the stock to a sideways range of Rs 120-150 in the upcoming months. Next resistances are at Rs 170 and Rs 200.

Can I buy Tecpro Systems Ltd at 300? Is it a good stock for long-term holding?

Swaminathan

Tecpro Systems (Rs 299.3): The stock has limited history; as it got listed only last October. Since then, it's been on an intermediate-term downtrend. However, after recording an all-time low at Rs 225 on March 17, the stock started to move higher. This up move lost its momentum after retracing 38 per cent Fibonacci retracement level of its prior downtrend and encountering key resistance around Rs 325 in early May. Investors can consider buying the stock only on a strong move beyond Rs 325. Upside targets are Rs 345 and Rs 366. A conclusive rally above Rs 366 will give long-term targets of Rs 420 and Rs 455.

Failure to move past the resistance at Rs 325, will pull the stock lower to Rs 280 and then to Rs 235 in the medium-term.

Could you please give me some good entry and exit levels for ICICI Bank for the next one year?

Sudhin Bathija, Chandrasekhar S.D.

ICICI Bank (Rs 1,044.2): After a turnaround from Rs 250 levels in March 2008, ICICI Bank had a strong rally until it encountered key resistance in the band between Rs 1,250 and Rs 1,270 in November 2010. Thereafter, the stock began to fall and has been on an intermediate-term downtrend. Though the stock took support twice from Rs 950 in February and moved higher, it lacked strength to rally beyond Rs 1,150 this April. As long as the stock trades below Rs 1,150, it has the possibility of declining to its key support level of Rs 950 in the medium-term. Investors can consider buying only if the stock reverses up from the support at Rs 950; they can exit at Rs 1,150. Else, investors can consider entering on a strong move above Rs 1,150 and exit at Rs 1,250 levels.

However, a decisive tumble below Rs 950 can pull the stock down to Rs 850 or Rs 800. In that case, next trading range for the stock will be between Rs 800 and Rs 950. Short-term support and resistance are at Rs 1,000 and Rs 1,100 respectively.

Kindly give your technical views on Dena Bank and Madras Fertilizers.

Unnikrishnan Kayarat

Dena Bank (Rs 89.7): Dena Bank has been on an intermediate-term downtrend since it peaked out, marking an all-time high of Rs 151, in November 2010. Nevertheless, the stock is currently testing its long-term support in the range between Rs 85 and Rs 90. Emphatic downward break out of this support will accelerate the stock lower to Rs 73. Subsequent long-term supports are pegged at Rs 60 and Rs 45.

Conversely, an upward reversal from the above mentioned support level can take the stock higher to Rs 101 to Rs 105 band. The stock has to rally beyond Rs 120 to mitigate the ongoing intermediate-term downtrend. In that case, it can trend higher to Rs 138 or Rs 150 in the long-term.

Madras Fertilizers (Rs 27.1): Madras Fertilizers is listed in NSE. Since March 2009 low of Rs 6, the stock has been on a steady long-term uptrend and its trendline is in tact. But presence of long-term resistance at Rs 31 is a key hurdle for the stock in the upcoming sessions. A downward reversal from this resistance can pull the stock down to Rs 20 and then to Rs 18 in the medium-term. Next key long-term supports are at Rs 15 and Rs 10.

Upward breakthrough of Rs 31 can take the stock higher to Rs 35 and then to Rs 38 in the long-term. Short-term supports for the stock are positioned at Rs 25 and Rs 23.

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