Query Corner - Siemens on course to life-time high

I have bought Aditya Birla Nuvo at Rs 980. What is your advice on the future of this stock?

S.L. Khendry

Aditya Birla Nuvo (Rs 915.9): This stock is known for giving heart-stopping moments to investors, both of the pleasant as well as the unpleasant kind. It doubled in value between August 2007 and January 2008 only to see its price erode 86 per cent in the ensuing crash. The recovery in 2009 halted at Rs 1,050 and the stock is currently biding its time in a broad trading range between Rs 700 and Rs 1,000.

This seems like a base-building effort that can be followed by a move higher to Rs 1,165, Rs 1,420 or Rs 1,670 over the long-term. However, it is difficult to envisage a move to the stock's life-time high of Rs 2,500 in the next two years at least. It is sometimes more than a decade before such peaks, recorded in bull-market frenzies, are revisited.

Medium-term supports for the stock are at Rs 700 and Rs 600. Investors can hold the stock as long as it trades above the second support. Since the stock has strong resistance at Rs 1,000 and then at Rs 1,160, investors with short- to medium-term perspective can divest their holding if the stock shows disinclination to move beyond these levels.

Kindly provide me advice on ABB and Siemens.

Murali

ABB (Rs 882.2): ABB peaked well before rest of the others in November 2007 at the peak of Rs 1670. The crash from this height resulted in the stock losing 80 per cent of its value. Though it has recovered from the dregs of the bear market bottom, it still remains in a structural down-trend. The stock has key long-term resistance in the zone between Rs 850 and Rs 900 and it is unable to move past it despite multiple attempts since January 2010.

Strong weekly close beyond this level can take the stock to Rs 1,015 or Rs 1,170. Long-term view on the stock will turn positive only if the stock manages to move above Rs 1,170. The stock could, however, find it difficult to do so over the next 12 months.

Supports for the months ahead are at Rs 750 and Rs 600. Investors can hold the stock as long as it holds above the second support.

Siemens (Rs 931.8): This stock is on a roll in 2011 despite the turbulence in broader market. Siemens is up 13 per cent since the beginning of this year and at a 3-year high. It seems to be on its way to the previous life-time high of Rs 1,125 recorded in November 2007. There could be some resistance in the zone between Rs 1,050 and Rs 1,125 and the stock could spend some time struggling to move above it.

Supports for the months ahead would be available at Rs 750 and Rs 650. Investors can hold the stock as long as it trades above Rs 750. They can also utilise corrections to buy the stock with stop at Rs 740.

Please provide technical view on Arvind Limited. Is it time to book profit in this stock?

Arun Thambidurai

Arvind (Rs 87.3): Arvind started rising in September last year and the stock price has doubled in value since then. Investors, however, need to stay on their guard since the stock is nearing a very strong resistance at around Rs 90. Investors with short- to medium-term perspective can take some profits if the stock struggles to move beyond this level.

Breach of this hurdle can, however, take the stock to Rs 107 or Rs 141. The stock has key medium-term supports at Rs 70 and Rs 60. Investors can hold the stock as long as it holds above the second support. Decline below this level will pull the stock to Rs 50 or even Rs 41.

Please let me know the technical analysis of Ranbaxy.

Swamulu Kanimalla

Ranbaxy Laboratories (Rs 542.8): Ranbaxy Laboratories has strong long-term resistance in the zone between Rs 600 and Rs 650. The stock formed significant peaks in this area in January 2005 and again in June 2008. It is, therefore, not surprising that the stock reversed lower from the peak of Rs 580 last November. The correction from this peak, however, halted at Rs 435 that is a critical medium-term support. If this level holds, the stock can move sideways in the region between Rs 400 and Rs 650 for few more months before breaking out higher.

However, decline below Rs 435 will mean that the stock can move lower to Rs 371 or even Rs 328. Long-term target on a strong move above Rs 650 is Rs 800.

I have MIC Electronics purchased at Rs 44. Please advise on the stock.

Srinivasan

MIC Electronics (Rs 12.9): MIC Electronics was once a favoured stock among the trading fraternity, and it hit the high of Rs 217 in the heydays of the bull-market of 2007. But the stock's performance in the recovery since March 2009 is dismal leading to the surmise that the rally towards the end of 2007 could have been a purely speculation-driven one.

After recording the peak of Rs 60 in September 2009, the stock is once again wallowing near its all-time low. The stock is extremely vulnerable in corrections and it would be best to switch out of this stock at this juncture.

I am holding shares of Rishi Laser purchased at Rs 76 and Hikal at Rs 442. Can I hold these stocks or sell? Please give me the outlook of these stocks.

N. Gopalakrishnan

Rishi Laser (Rs 47.8): Rishi Laser is not a stock for the faint-hearted. The stock went in to a vicious spiral downward in 2008 as it tumbled from Rs 205 to Rs 20. The recovery from this trough stalled at Rs 88 and the stock is once more in a medium-term correction. This correction is halting at the key medium-term support at Rs 45. Any further decline can pull the stock down to Rs 27 or even Rs 20. Investors are, therefore, advised to divest their holding on a close below Rs 45.

If the stock manages to reverse from current levels, it can move to Rs 72 or Rs 90. Long-term outlook will turn positive only on a move above Rs 90.

Hikal (Rs 309): Hikal took a deep cut in the recent correction and the stock has lost over 35 per cent since last September. This down-move is halting at the critical medium-term trend deciding level of Rs 260. The stock tested this level in February and is attempting to hold above it since then, moving in the range between Rs 260 and Rs 340. Investors can hold the stock as long as it trades above Rs 260. Reversal from here can take the stock higher to Rs 400 or even Rs 487 over the medium-term.

Conversely decline below Rs 260 will mar the medium-term view paving the way for a decline to Rs 225 or even Rs 175 in the medium-term. Long-term outlook for Hikal will turn positive only if the stock goes on to close above Rs 500.

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