Date:23/11/2008 URL: http://www.thehindubusinessline.com/bline/iw/2008/11/23/stories/2008112350280800.htm

Back Query Corner: What the charts say

Please advise whether I can purchase Graphite India and Jyoti Structure at current levels. Nageswara Rao Mallela

Graphite India (Rs 34): Graphite India is one of the rare stocks in which the long-term trend continues to be up. The stock is currently halting close to the long-term trend-deciding level at Rs 37.

The fact that the stock rebounded from here in June 2006 adds to the significance of this level.

Investors with a higher risk appetite can buy the stock in the band between Rs 32 and Rs 45 with a stop at Rs 30.

Less aggressive investors can wait for a weekly close above Rs 45 before buying the stock.

Short-term resistance levels are Rs 45 and then Rs 53. However, the key medium-term resistance would be at Rs 65.

Reversal below this level would mean that the stock could move in the range between Rs 30 and Rs 65 for a few more months.

Jyoti Structures (Rs 60.1): This stock is down almost 90 per cent from the peak recorded in January.

It has also given up almost all the gains made since 2003. Though Jyoti Structures is attempting to reverse from the recent trough at Rs 32, the up-move this far lacks strength.

Aggressive short-term investors can buy at current levels with a stop at Rs 45.

A move to Rs 90 or Rs 102 is possible in the near-term. The short-term trend will however turn positive only on a weekly close above Rs 102. Risk-averse investors can buy the stock on a weekly close above this level.

Key medium-term resistance for the stock would be at Rs 140.

I hold shares of SAIL bought at an average price of Rs 189. Should I sell at current levels and buy lower? How much lower can it go? Prabha

Steel Authority of India (Rs 62.9): In our previous review of this stock in June this year, we had expected the stock to halt at Rs 115 and we had envisaged a move between Rs 115 and Rs 300 over the next year.

The all-encompassing decline in October however yanked Steel Authority of India below Rs 115.

The stock is currently halting around Rs 60 that coincides with the troughs formed in June 2006.

The long-term trend-line is also positioned here.

Investors can hope for a rebound from current levels.

The next long-term support band for the stock is between Rs 50 and Rs 55, which isn’t too far.

You can hold the stock with a stop at Rs 50.

Sell on a breach of this level since the next halt could be at Rs 24. Short-term resistance levels for the stock are at Rs 96 and then Rs 120.

The medium-term outlook for the stock will turn positive only on a close above the second resistance.

I have added Tech Mahindra at an average price of Rs 412. Should I add more at the current market price or should I sell the stock? Nagaraja

Tech Mahindra (Rs 245.7): In our previous review of Tech Mahindra, we had advised long-term investors to hold the stock as long as it held above Rs 500.

The all-time low of this stock was then at Rs 520 that was recorded on the day of its listing.

Since this level has been shattered, there are no further supports on the chart due to the limited trading history. The stock is currently down 70 per cent from it September peak.

The medium-term outlook is extremely weak since even the October bounce could not revive the prospects for this stock.

It would be best to sell this stock at current levels as it is not possible to identify where it will finally bottom.

Averaging is also dangerous since further decline will widen the loss.

Re-entry can be contemplated on a weekly close above Rs 525.

Please advice me on the long-term technical outlook for JSW Steel and Bombay Dyeing. Ajith Bokadia

JSW Steel (Rs 204.4): In our review of JSW Steel in April, we had expected the stock to decline to Rs 650 or Rs 560 and had advised that investors could wait for a rebound from these levels before buying this stock.

But it has been a one-way move for the stock once it penetrated Rs 700 in the first week of September.

The key long-term supports have been left far behind and the stock is now taking support at the 2006 low at Rs 180.

Though there is a strong support zone between Rs 180 and Rs 200, the movement of JSW Steel since October 27 is far from convincing.

A range-bound move between Rs 180 and Rs 400 is likely for a few weeks before the stock makes a decisive move in either direction.

Investors can hold the stock with a stop at Rs 170. If this level is breached, a decline to Rs 100 or even Rs 75 becomes a possibility.

Key resistances over the next year would be at Rs 550 and then Rs 660.

Bombay Dyeing (Rs 154.8): Bombay Dyeing was crushed out of shape in the month following September 19 as the stock tumbled from Rs 520 to Rs 130.

Needless to add, the stock is currently below all major support levels.

The next long-term support zone for the stock is between Rs 120 and Rs 170.

The stock moved in this zone between October 2003 and July 2004.

Investors can hold the stock with a stop at Rs 120.

However, breach of this level will drag the stock towards Rs 64 and then Rs 42. It would be best to divest the holdings in rallies.

I have purchased Sobha Developers at Rs 103 and Vishal Retail at Rs 75. Please give your views on these stocks. Sayli Satish

Sobha Developers (Rs 88.5): Sobha Developers moved in a range between Rs 700 and Rs 1,000 up to March 2008.

But once the lower boundary of this range was penetrated, the stock has been sliding helplessly.

The disconcerting factor in the stock’s decline this year is that the corrective counter-trends have displayed no strength at all.

The inference is that there has been very little buying interest in this stock.

The stock is currently at a life-time low and it is not possible to identify where it can finally bottom.

Since you have purchased the stock recently, we recommend an exit at current levels.

It is futile to try and catch the bottom in any stock.

Wait for a sustainable bounce beyond Rs 230 before buying the stock back.

Vishal Retail (Rs 55.6):

Vishal Retail is another stock that is sure to send any investor in to a gloomy fit. This stock is rolling down a seemingly bottom less pit and it is not possible to judge where the stock will finally halt.

To use a well-worn cliché, buying such stocks is akin to catching falling knives.

It is best to forego the satisfaction of catching a stock at its lowest point in order to evade capital erosion.

Wait for a strong reversal before venturing to buy any stock.

We recommend a switch out of Vishal Retail at this juncture.

— Lokeshwarri S.K.

(Readers can send in their queries, on not more than two companies, to techtrail@thehindu.co.in.

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