Power Finance in medium-term slope

I would like to know the long-term prospects of Kesoram Industries bought at Rs 524 in September 2007. Will I be able to get my purchase price in long-term?

G. RamaKrishna Bhat

Kesoram Industries (Rs 194.9): The stock has been on a long-term downtrend from its December 2007 peak of Rs 675. In early 2010, the stock failed to break through its key long-term resistance band between Rs 400 and Rs 420 and resumed its downtrend. Since then, the stock has been on an intermediate-term downtrend. Moreover, medium- and short-term trends are down for the stock. However, it is currently testing significant longer-term support band between Rs 175 and Rs 200. Long-term investor can stay invested with stop-loss at Rs 150.

A fall below this level can pull the stock down to its March 2009 low of Rs 102 and further down to Rs 83 in the long-term.

Strong reversal from current support level will lift the stock higher to Rs 250 and then to Rs 300 in the intermediate-term. Long-term resistances are at Rs 350 and Rs 400. Failure to surpass first resistance will signal weakness and investors can divest their holdings.

Kindly provide us the technical outlook for Vakrangee Softwares over the next six month's time.

Bedi Ram

Vakrangee Softwares (Rs 281): After bottoming out at March 2009 low of Rs 19, the stock has been on a long-term uptrend. However, recording a multi-year high at Rs 338 in November 2010, the stock began to decline. In the past, the stock has reversed lower from its significant long-term resistance level of Rs 300.

The stock failed to breach this resistance level in January and is in a short-term downtrend. It can decline further until it finds support at its significant long-term support level at Rs 250 in the weeks ahead. Tumble below this support will drag the stock down to Rs 200 in the next six months.

On the other hand, emphatic weekly close above Rs 300 will lift the stock higher to Rs 338 and then to Rs 383.

Can I buy Andhra Bank at these levels?

Satish Yanamadala

Andhra Bank (Rs 141.6): In our review of this stock in August 2010, we had given a target of Rs 176. In line with our expectation, the stock rallied higher and reached its target in October 2010. Nevertheless, after marking an all-time high at Rs 190, the stock did a volte-face and has been on a medium-term downtrend.

The stock is facing immediate resistance at Rs 150. Investors should initiate fresh purchase only on a conclusive close above this level. Upside targets for the stock would be Rs 167 and then Rs 185.

Inability to surpass Rs 150 will pull the stock once more back to key support range between Rs 120 and Rs 125 in the weeks head. We reaffirm that fresh investments are however not recommended on a move below Rs 120. Such a move will mean that the stock could decline to the support zone between Rs 95 and Rs 105. The structural uptrend in the stock will not be threatened as long as the stock trades above Rs 95.

Please provide the long-term technical outlook on Ranbaxy Laboratories?

M.K Maheshwari

Ranbaxy Laboratories (Rs 502): Since November 2010 peak of Rs 624, it has been on a medium-term downtrend. The stock conclusively penetrated its long-term uptrend-line which was in place since March 2009 trough of Rs 133 in early February 2011. Investors with long-term perspective can consider holding the stock with stop-loss at Rs 360. Fresh purchase can be made in the range between Rs 440 and Rs 460 with medium-term stop-loss at Rs 390. Strong surge above Rs 520 will lift the stock higher to Rs 600 and Rs 640 in the medium-to long-term.

I have purchased shares of Thomas Cook at Rs 63 and shares of Power Finance Corporation at Rs 312. Please give their technical outlook.

Pawan Kumar

Thomas Cook (Rs 45.6): The stock failed to move beyond its important long-term resistance level of Rs 75, after testing it in January and September 2010. Subsequently, the stock began to decline and has been on an intermediate-term downtrend since last September.

The stock decisively penetrated its long-term support at Rs 50 in the first week of February 2011 and it slipped further to record new 52-week low at Rs 43 last week. As long as the stock trades below Rs 60, the intermediate-term trend remains down.

Short-term trend is also down for the stock and the weakness continues as long as it hovers below Rs 51. Only a strong move above Rs 51 will mitigate the short-term downtrend and push the stock higher to Rs 55 or Rs 60. Make use of rallies to exit from the stock with a stiff stop-loss. However, failure to surpass Rs 51 can pull the stock once more down to Rs 43 and Rs 40. Plunge below Rs 40 will pull the stock down to Rs 30 (March 2009 low) in the long-term.

Power Finance Corporation (Rs 249.6): The long-term uptrend of Power Finance Corporation that started in October 2008 low of Rs 86 came to an end, after it encountered resistance around Rs 380 in October 2010. The stock has since been on a medium-term downtrend and emphatically broke through its long-term support at Rs 280 in late January 2011. It has almost retraced 50 per cent fibonacci retracement level of its prior up move and is now testing its intermediate-term support in the band between Rs 235 and Rs 240.

Strong fall below this support band can increase selling pressure and pull the stock down to Rs 200 and then to Rs 180 in the medium-term. Investors with long-term perspective can consider holding the stock with stop-loss at Rs 190.

A reversal from its present support can provide a corrective rally up to Rs 280 in the medium-term. Weekly close above Rs 300 will mitigate the downtrend and encourage the stock to move higher to Rs 340 and Rs 380 in the long-term.

Short-term trend is also down for the stock. Immediate support and resistance for the week ahead are at Rs 240 and Rs 270.

Please give short- and medium-term outlook on Petronet LNG and Mahindra Satyam. Can I buy the stocks at current levels?

Sriram

Petronet LNG (Rs 120): Petronet LNG has been on a long-term bull run from its December 2008 low of Rs 29, forming higher peaks and troughs. In October 2010, the stock breached its key long-term resistance level of Rs 120 (early 2008 peak) and started consolidating sideways.

The stock has formed a rising wedge pattern, a bearish reversal during this sideways consolidation phase. After recording a life-time high at Rs 136 on January 19, it began to decline. Backing the rising wedge pattern, the daily as well as weekly moving-average convergence-divergence indicators are displaying negative divergence.

On February 10, the stock tumbled 5.5 per cent with good volumes, breaking through its rising wedge pattern. This decline has also breached its 21- and 50-day moving averages strongly. Short-term trend is down. Moreover, the stock appears to have reversed direction from a medium-term horizon. It has potential to decline further to its immediate support zone between Rs 100 and Rs 105. Traders can consider buying in this range with tight stop-loss. On the other hand, avoid fresh purchase on a plummet below Rs 100, as that will only accelerate the downtrend and pull the stock straight down to Rs 85 and Rs 80 band in the intermediate-term.

Mahindra Satyam (Rs 57.9): The stock has been on a long-term downtrend from its May 2008 peak of Rs 544. Moreover, the stock encountered resistance at Rs 125 in September 2009 and resumed its long-term downtrend. Since then, it has been on an intermediate-term downtrend, shaping lower peaks and troughs. Strong close below its immediate support level of Rs 50 can pull the stock down to Rs 24 in the long-term. Key resistances are at Rs 80 and Rs 95. We don't recommended buying in this stock as it is very volatile and is in bears' grip.

(Readers can send in their queries, on not more than two companies, to >techtrail@thehindu.co.in Queries can also be sent by post to: Tech Trail, 859/860 Kasturi Buildings, Anna Salai, Chennai 600002. We would endeavour to answer as many queries as possible. However, constraints of space will limit the responses featured under this column.

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