Query Corner: United Spirits in medium-term slope

I have brought United Spirits at Rs 1,565. Should I hold or exit at current price?

H.P. Swamy

United Spirits (Rs 1,026.7): United Spirits was on a long-term uptrend from its January 2009 low of Rs 425 until it encountered resistance in the band between Rs 1,680 and Rs 1,700 in October 2010. However, the stock changed its trend and has been on a medium-term downtrend since. While trending down, it penetrated its significant long-term supports at Rs 1,400 and Rs 1,200 emphatically. Next long-term support is at Rs 900. Reversal from this support is possible in the medium-term. This can take the stock higher to Rs 1,200. Only a conclusive break through of this level will lift the stock higher to Rs 1,400 and then to Rs 1,500 in the long-term.

Long-term investors can hold the stock with stop loss at Rs 850. A strong tumble below Rs 850 can drag the stock down to Rs 700 and then to Rs 500 in the long-term. Inability to move beyond Rs 1,100 will pull the stock down to Rs 900 in the short-term.

Please provide long-term analysis on Bajaj Hindusthan purchased at Rs 240.

R.M. Kumarappan

Bajaj Hindusthan (Rs 72.2): After encountering resistance at its long-term resistance level of Rs 240 in January 2010, the stock price started to decline. And since then, Bajaj Hindusthan has been on a long-term downtrend, shaping lower peaks and lower troughs. Medium-term trend is also down for the stock from its November 2010 peak of Rs 144. This downtrend got accelerated and witnessed sharp declines after it breached its key support at Rs 98 in this January. The stock is currently testing its key long-term support at Rs 70.

Daily indicators are displaying positive divergence, suggesting that a trend reversal may be on the cards. A strong move above the immediate resistance at Rs 85 can take the stock higher to Rs 100, Rs 120 and then to its key long-term resistance level of Rs 150. The stock may find it difficult to surpass your purchase price of Rs 240.

We suggest you to switch from the stock. An emphatic close below Rs 66 is the indication of resumption of the downtrend and the stock can decline to Rs 50 and then to its March 2009 low of Rs 39 in due course.

I have bought shares of Essar Shipping at Rs 98. Can I hold the stock for six months?

Suresh Kumar Yadav

Essar Shipping Ports and Logistics (Rs 87.9): Essar Shipping has been trending higher since its March 2009 low of Rs 19.4. However, following a corrective decline from the resistance level of Rs 115, the stock found support at Rs 70 in late February 2011. Triggered by positive divergence, the stock resumed its uptrend and is currently testing resistance at Rs 90. Breakthrough of this level can take the stock higher to Rs 100, Rs 110 and then to Rs 120 in the medium-term. Investors with medium-term horizon can hold the stock with stop-loss at Rs 78. Subsequent, support for the stock is at Rs 70.

Long-term investors can hold the stock as long as it hovers above Rs 64. Decisive move beyond Rs 120 will lift the stock higher to Rs 140-Rs 150 range. However, slump below Rs 64 will drag the stock down to Rs 50, Rs 40.

I would like to purchase stocks of PVR. Please advise if the current price is a good price to buy for long-term investment? Also give target price for next 2-3 years.

Kumar T.K.

PVR (Rs 101): The stock has been on a long-term downtrend from its January 2008 peak of Rs 376 levels. After encountering resistance at Rs 193 in September 2010, the stock resumed its downtrend and has been on a medium-term decline since. However, the stock is now taking support above its long-term support band between Rs 85 and Rs 90. Reversal from this support band can lift the stock higher to Rs 115, Rs 132 and Rs 150 in the medium-term. Investors with a medium-term perspective can consider buying the stock with stop loss at Rs 85. Next resistance above Rs 150 is at Rs 200, and it is difficult to envisage a move beyond this level over the next two years. Long-term investors can hold the stock with stop loss at Rs 85 and exit it around the said resistance level.

On the other hand, inability to move higher from the support band will signal weakness and a strong close below Rs 85 can drag the stock to Rs 70 and then to its all-time low of Rs 57.5 in the medium-term.

Please let me know the medium- and long-term outlook for Moser Baer India and Lakshmi Vilas Bank.

Aboobacker

Moser Baer India (Rs 43.7): After peaking out around Rs 115 in June 2009, the stock started to decline and has been on an intermediate-term downtrend. Long- and medium-term trends are also down for the stock. On February 11, the stock recorded a multi-year low of Rs 37.3 and has been moving sideways forming a base in the range between Rs 37 and Rs 40. The stock's five per cent jump on Friday with extraordinary volume signals that the stock appears to have bottomed-out from a short-term perspective. It can rally to Rs 47 and then to Rs 52. Reversal from the second target will pull the stock down to its key support range mentioned above.

To mitigate the medium-term downtrend, the stock has to emphatically close above Rs 63. In that case, the stock can move higher to Rs 75. Significant long-term resistances are positioned at Rs 90 and Rs 115. Long-term outlook remains bearish for the stock as long as it trades below Rs 150.

Lakshmi Vilas Bank (Rs 96.7): The stock has been on a long-term uptrend from its all-time low of Rs 37 recorded in early 2009. In February 2011, the stock tested its significant long-term support level of Rs 90 and bounced up. As long as the stock trades above Rs 76, the long-term outlook remains positive and investors can stay invested while maintaining stop at this level. Immediate resistance for the stock is at Rs 105. Strong move above this level can take the stock higher to Rs 120 in the medium-term. In the long-term, the stock can rally to Rs 130 and then to its key long-term resistance level of Rs 140.

Failure to exceed above Rs 105 will pull the stock down and it can remain trading sideway between Rs 90 and Rs 105 before moving higher. A strong slump below Rs 90, however, will pull the stock down to Rs 84 and Rs 76 in the medium-term.

I bought Allied Digital Services at Rs 234 and Geodesic at Rs 119 respectively. Please let me know the long-term outlook for the stocks.

K. Parthasarathy

Allied Digital Services (Rs 90.9): Following a broad sideways consolidation in the range of Rs 200-Rs 270 from August 2009, the stock made a downward break through in November 2010. The stock's downtrend accelerated in February 2011 and retraced its entire up move formed in first half of 2009 before finding support at Rs 71. The stock has an important long-term support in the band between Rs 70 and Rs 80. It is currently trying to reverse from the support band.

The stock will face immediate resistance at Rs 100. A break through of this level will push the stock higher to Rs 120 and then to Rs 150, which is a key long-term resistance. We don't envisage a move beyond Rs 150 in the long-term. Investors can consider switching from the stock. Next key resistances are positioned at Rs 170 and Rs 190.

Geodesic (Rs 79.9): Geodesic has been broadly consolidating sideways in the range between Rs 70 and Rs 150 since early 2009. The stock can continue to move within the range in the long-term and investors can hold the stock with deeper stop at Rs 60, and exit there — the upper end of the sideways range. Medium-term trend is down for the stock from its 2010 peak of Rs 140. However, the stock found support around Rs 70 in early February and is attempting to move upwards. Medium-term investors can hold the stock with a stop at Rs 67. It can rally to Rs 90 and 100. Strong move above Rs 110 is required to mitigate the current downtrend.

techtrail@thehindu.co.in

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