Here are answers to readers’ queries on the performance of their stock holdings.

I hold the stocks of Mahindra & Mahindra Financial Services and Somany Ceramics. Should I average?

Athul John

Mahindra & Mahindra Financial Services (₹390.3): The stock encountered a key resistance at around ₹520 in late April and July this year and began a decline. Since July, the stock has been on a medium-term downtrend. However, key support in the band between ₹340 and ₹350 cushioned the stock in early October and also last week. After taking support, the stock bounced up, gaining 9 per cent with good volumes last week. As long as the stock trades above the key long-term support in the band between ₹340 and ₹350, the uptrend that began in early 2016 will remain in place. You can consider averaging the stock with a stop-loss at ₹330 levels.

 

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The stock tests a key resistance ahead at ₹410. A strong break above this resistance will strengthen the bullish momentum and take the stock northwards to ₹450 and then to ₹480 in the medium term. The next key resistances beyond ₹480 are placed at ₹500 and ₹520, which is a significant long-term resistance.

On the other hand, a conclusive fall below ₹340 will mar the uptrend and drag the stock down to ₹330 and ₹300 levels.

A plunge below ₹300 could lead to selling pressure and drag the stock down to ₹250 in the long run.

Somany Ceramics (₹337.8): Following a strong rally in 2016 and 2017, the stock recorded a new high at ₹973 this January and changed direction, triggered by negative divergence.

Since then, the stock has been in an intermediate-term downtrend. While trending down, the stock decisively breached key supports at ₹700 and ₹500. Medium-term trend is also down for the stock.

 

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However, the stock now tests the next key long-term support in the range between ₹300 and ₹320. The daily indicators and oscillators show positive divergence, implying that a trend reversal may be on the cards.

Consider partially averaging at current levels with a stop-loss at ₹290. A strong rally above the immediate resistance at ₹350 can push the stock higher to ₹400 and then to ₹450 in the medium term.

A further break above ₹500 is needed to alter the medium-term downtrend and take the stock northwards to ₹550 and ₹630 levels.

To alter the intermediate-term downtrend, the stock needs to breakthrough the vital resistance at ₹700. Subsequent long-term targets are ₹800 and ₹920.

An inability to move beyond ₹500 will keep the stock range-bound between ₹300 and ₹500 for a while. Conversely, a plunge below the key base level of ₹300 will strengthen the downtrend and drag the stock down to ₹265 and then to ₹240 levels.

In this scenario, investors with a long-term perspective can buy the stock in declines with a stop-loss at ₹230 levels.

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