Technical Analysis

QUERY CORNER: Long-term uptrend in Tata Motors

Lokeshwarri S. K. | Updated on April 12, 2011 Published on April 09, 2011

Please give the technical view of Titan Industries.

R. Jain

Titan Industries (Rs 3,911.1): In our review of this stock in January, we had indicated that the stock was in a very strong uptrend and that the medium-term correction that began last November could halt in the zone between Rs 2,900 and Rs 3,000. We had given Rs 2,850 as the stop-loss for short-term investors and Rs 2,000 as the stop-loss for long-term investors.

The stock reversed higher from the low of Rs 2,943 formed in February after declining 30 per cent from its peak. As explained earlier, sideways move between Rs 2,950 and Rs 4,250 will be positive from a long-term perspective ushering in a rally to Rs 4,250 and beyond that to Rs 5,150 over the ensuing months. Investors with short- to medium-term perspective can book some profit if the stock stutters around the previous peak around Rs 4,250.

Please provide your view on Sunil Hitech Engineers.

Amit

Sunil Hitech Engineers (Rs 127.8): Sunil Hitech Engineers is a very volatile stock and investors with a lower risk appetite should steer clear of it. This fact is borne by the steep fall in 2008 that made the stock lose almost 90 per cent from its peak. The recovery in 2009 halted below the key long-term resistance at Rs 276 and the stock is once more drawing close to its March 2009 trough.

Investors should watch out for the resistance around Rs 150. If the stock does not clear this level, it can decline to Rs 81 or even to Rs 50 over the ensuing months. However, a move above Rs 150 can take the stock towards the next targets at Rs 197 and Rs 268.

Long-term outlook will turn positive only on a close above Rs 276.

I am holding BGR Energy bought at Rs 500. Can I hold this stock for the long-term?

Swaminathan

BGR Energy Systems (Rs 530.8): The long-term trend in BGR Energy reversed higher in March 2009 and the stock went on to record the peak of Rs 871 in September last year. Despite the strong decline since this peak, the long-term trend has not been dented. The stock needs to record strong weekly close below Rs 400 to negate the positive long-term view. Investors can, therefore, hold the stock with stop-loss at Rs 380.

The stock can move higher to Rs 580 or Rs 700 in the ensuing months. Investors with short- to medium-term perspective can book profit at either of these levels. Reversal from these resistances would result in the stock vacillating in a wide band between Rs 400 and Rs 700 for a few months.

Strong move beyond Rs 700 can take the stock to Rs 870 or Rs 1,160 over the long-term.

Kindly give me the outlook for Tata Motors and Jindal Steel.

Vivek Agarwal

Tata Motors (Rs 1,254.9): Tata Motors recorded a strong recovery from the low of Rs 126 recorded in February 2009. The peak of Rs 1,381 recorded in December last year was 43 per cent above its previous life-time high recorded in April 2006. The long-term trend in the stock continues to be up since the correction from the Rs 1,381 peak was quite shallow. Strong weekly close below Rs 900 will be the first indication that the long-term view is turning negative. Investors can, therefore, hold the stock as long as it trades above Rs 900. Subsequent long-term supports are Rs 750 and Rs 600.

Medium-term supports for the stock are at Rs 1,032 and Rs 945. The stock is likely to face resistance close to its previous peak at Rs 1,380. A reversal from there can keep the stock in the band between Rs 1,030 and Rs 1,400 for a few months before attempting to move higher to Rs 1,500 or Rs 1,740.

Jindal Steel and Power (Rs 700.5): Jindal Steel raced from the low of Rs 86 recorded in October 2008 to Rs 749 by December 2009. But the stock was not able to make any further headway and it is vacillating in a wide band between Rs 600 and Rs 750 since then. Investors can hold the stock with stop at Rs 500. Continuous movement in this band can result in the stock moving higher to Rs 1,000 over the long-term.

Key long-term support for the stock is at Rs 500. Decline below this level will mean that the stock can head lower to Rs 428 or Rs 350 over the long-term.

I have invested in SRF at Rs 140 and Monsanto India at Rs 1,440. Is there any sign of these stocks topping out in the short- to medium-term? Would you advise to stay invested?

Sandeep Dhawan

SRF (Rs 344.3): SRF faces key long-term resistance at Rs 375. Since the stock is reversing lower after moving close to this zone, the correction can now pull the stock down to Rs 330 or Rs 310. Investors with short- to medium-term perspective can cash out at this level since the stock is likely to struggle to move above Rs 375 in the ensuing months.

Investors with long-term perspective can hold with stop at Rs 300. Next downward target is Rs 270. Strong move above Rs 375 is required to take the stock to its record peak of Rs 444.

Monsanto India (1,897.2): Monsanto India is also reversing downward from its key long-term resistance at Rs 1,975. This decline can pull the stock to Rs 1,800 or Rs 1,700 over the ensuing weeks. Investors with short-term perspective can book some profit at current level and hold the rest with stop at Rs 1,800. The stock will however find it hard to move above Rs 1,975 in the upcoming months. A broad side-ways move between Rs 1,700 and Rs 2,000 appears likely over the medium-term.

I bought Bafna Pharma at Rs 47. Should I hold or exit?

P.K. Roy

Bafna Pharmaceuticals (Rs 45): This stock is moving in a consolidation range between Rs 40 and Rs 55 since June last year. It is hard to envisage a break-out above this range just yet and investors with short-term perspective can exit as the stock nears the upper end of this band. Those with a longer investment horizon can hold with stop at Rs 36. If the stock continues to move in the aforementioned range, it can break-out to Rs 71 over the long-term.

However, break of the support at Rs 36 can drag the stock down to Rs 32 or Rs 26 over the ensuing months.

I have purchased Wockhardt at Rs 380. Please let me know its long-term prospects.

Mukesh Kumar

Wockhardt (Rs 361.5): In our review of this stock in August last year when the stock was trading at Rs 161, we mentioned that the downside appears limited and that investors with three to five year time-frame can accumulate the stock in declines with stop at Rs 110. We had also said that the long-term view for the stock would turn positive only on a weekly close above Rs 250.

The stock moved beyond Rs 250 in September and is currently testing the long-term resistance at Rs 370. Long-term view for the stock will turn positive only on a close above this level paving the way for a re-test of the previous peak at Rs 557.

Investors with short- to medium-term perspective can hold the stock with stop at Rs 280. Subsequent supports are at Rs 248 and Rs 205.

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