Back Query Corner
B. Krishnakumar
I bought India Cements at Rs 45.90 and Ashok Leyland at Rs 22. What is the outlook of these stocks and should I hold or sell them? — N. Sivasubramanian, Krishnamurthy & P.G.K. Raju
India Cements (Rs 39.3): The trend is likely to turn bullish on the completion of the ongoing correction. The stock is likely to seek support at the Rs 37-38 range. A move past Rs 42 would impart strength and could push the stock to higher levels. The trend would turn weak if the share price drops below Rs 37. Investors may hold with a stop-loss at Rs 37 for a portion of the holding and at Rs 35 for the rest. A close below Rs 35 would almost blunt the chances of a recovery in share price.
Ashok Leyland (Rs 18.9): Though there is downside risk in the stock, the trend would turn bullish after the completion of the current phase of decline. The stock may drop to the Rs 14-15 range and a recovery may take shape subsequently. A move past Rs 22 would be an indicator of the onset of bullish phase. Risk-seeking investors may hold with a stop-loss at Rs 14. Investors uncomfortable with this stop-loss level may sell a portion of the holding at prevailing levels and have a stop-loss at Rs 16.5 for the balance. If the stop-loss gets triggered, fresh buying may be considered on a subsequent move past Rs 22.
Shall I buy Shipping Corporation at prevailing rates or wait for correction and enter at lower levels? — P. Naganathan
Shipping Corporation (Rs 163.3): There is a possibility of a drop to the Rs 152-155 range. The long-term trend is, however, positive. The stock is likely to move to the Rs 182-185 range. It would be advisable to wait for declines before committing funds. The positive trend would be negated if the share price declines below the stop-loss level of Rs 130. Existing holders may remain invested with a stop-loss at Rs 150. Fresh buying may be considered on declines. A "buy" signal would be triggered if the share price moves past Rs 175, without dropping to the support zone of Rs 152-155.
Is it advisable to hold on to SAIL bought at Rs 30 and Amtek Auto at Rs 580? — N.K. Gilra
SAIL (Rs 46.4): The near-term trend is weak. A drop to the Rs 40-42 range appears likely. Investors who have entered at lower levels may take partial profits and contemplate re-entry at lower levels of Rs 40-42. From a long-term perspective, the stock appears to have the potential to move to the Rs 62-62 range. This view would be valid if the stock holds above Rs 37. Stop-loss for existing holding may be placed at Rs 37.
Amtek Auto (Rs 153.6): The stock has recently started to trade on an ex-stock-split basis. The near-term outlook appears positive. A move to the Rs 168-170 range appears likely. Remain invested with a stop-loss at Rs 138. A drop below Rs 135 would impart weakness and would warrant reduction of holdings. Partial profit booking may be considered on a move past Rs 170.
I wish to take exposures in Havell's India and Praj Industries. What is the outlook for these stocks? — Eswaran Raju
Havell's India (Rs 176.1): There appears to be marginal downside risk. The stock is likely to move to the Rs 198-200 range. Investors willing to take delivery may buy the stock at prevailing levels and add to exposures on price dips. It is advisable to buy the budgeted quantity in a staggered manner at different price levels. Stop-loss for long positions may be placed at Rs 155. Investors uncomfortable with such a wide stop-loss may wait for price weakness and take exposures.
Praj Industries (Rs 276.6): The long-term trend remains positive. Though the stock could seek lower levels in the near term, the share price could move to the Rs 305-310 range on the completion of the downward trend. Remain invested with a stop-loss at Rs 252. Fresh buying may be considered on evidence of support at the Rs 260-265 range.
What is outlook for SKF India bought at Rs 105 and Kotak Mahindra Bank at Rs 157? — M. Narasimhan
SKF India (Rs 116.7): After a prolonged bearish phase, the stock has stabilised and gained ground over the last couple of years. The share price has potential to seek higher levels of Rs 132-135. The stock enjoys support at the Rs 110-112 range. Remain invested with a stop-loss at Rs 103. Fresh buying may be considered on a move above Rs 123, with a stop-loss at Rs 113.
Kotak Mahindra Bank (Rs 146.3): The stock has been confined to a trading zone for more than three months now. Only a breakout from the trading range would impart meaningful trend. The recent price pattern indicates that the stock could drop to the Rs 135-136 range. At least a short-term bounce may materialise after the expected drop to the Rs 135-136 range. Hold with a stop-loss at Rs 125.
I am holding Jindal Steel bought at Rs 693 and HDFC at Rs 630. What is outlook for these stocks and at what level should I exit? — Abhay Sancheti
Jindal Steel (Rs 691): The stock has seen a sharp rally in the recent months. Though it has upside potential, the downward trend that has been prevalent in the recent weeks does not appear complete as yet. A drop to the Rs 655-660 range is not ruled out. Conservative investors may reduce exposures by selling at market rates. Fresh buying may be considered on evidence of support at the Rs 655-660 band as the long-term outlook is positive. Investors who have entered at fairly lower rates may hold with a stop-loss at Rs 660.
HDFC (Rs 663.5): The stock has a long way to be covered on the upside, if the patterns in the weekly and monthly charts are any indication. Investors may consider partial profit booking once the stock moves closer to the resistance zone of Rs 700. Fresh buying may be considered on price dips as the stock could move to the Rs 775-800 range after a short-term decline to the Rs 615-620 range.
Should I hold or sell Sesa Goa bought at Rs 759? — Suresh Mittal
Sesa Goa (Rs 684.4): The stock appears to be in a long-term bullish phase. The stock could drop to the Rs 620-625 range in the near term. Hold with a stop-loss at Rs 660 for a portion of holding. For the balance, the stop-loss may be placed at Rs 620. There is a possibility that the stock would bounce back to move past your entry price. There is no reason to sell the stock now. Given that you have already let the position run against you, it would be worthwhile to risk another Rs 24 by placing the stop-loss at Rs 660. A drop below Rs 620 would impart prolonged weakness and would delay the onset of the long-term bullish phase.
Could you comment on the outlook for Asian Paints? — Lijoo
Asian Paints (Rs 296.3): The short-term trend is weak and the stock could drop to the Rs 270-275 range. Those holding the shares may have a stop-loss at Rs 268. Fresh buying may be considered on the evidence of support at Rs 268-270 range. A drop below Rs 268 would warrant reduction of holdings. A move past Rs 320 would be a positive trigger and may be used to take long positions.
What is the outlook for Bank of India bought at Rs 56? — Danish Kapur
Bank of India (Rs 54.4): The view (indicated in the edition dated October 3) of a move to the Rs 63-65 range is still valid. Only a drop below Rs 50 would negate this view. Hold with a stop-loss at Rs 50.
I bought huge quantity of GNFC at Rs 60. Should we hold or sell? — Ravi Kapoor
GNFC (Rs 56.6): Only a move past Rs 63 would impart positive trend in the stock. On the other hand, a drop below Rs 52 would have bearish implications. As there are no signs of an uptrend in the near term, it would be better to sell a portion of the holdings at market rates. Out of the balance holding, a portion may be retained with a stop-loss at Rs 52 and the rest at Rs 45. A close above Rs 63 may be used to take long positions in limited quantity, with a tight stop-loss in place. — B. Krishnakumar
Though I have made money in the stock market, I have not been quite successful. Quite a few trades have gone awry and have affected my overall returns. What would be your advice to make healthy and consistent returns over a period of time? — Girish
Based on the queries received over the past several months, we have observed that quite a few investors are holding on to investments entered at fairly higher levels and nursing losses in the process. We would like to emphasise that a disciplined approach and an efficient money-management strategy is the key to long-term success in stock market investment. This is more important for traders as stock market trading is a game of containing losses.
Quite often, losing trades would outnumber the winning ones. In this context, only an efficient money management system would ensure consistent results.
Before taking an investment decision, investors need to be clear about the proposed entry, exit and stop-loss level. Once the funds are invested, the exit should be a market-triggered event and an emotional human intervention needs to be avoided after entering the trade.
The investment or the trade initiated should be closed if the price reaches the target level or when the stop-loss is triggered. It would not be an appropriate strategy to keep altering the exit/stop-loss strategy often after entering a trade. As long as the basis for the trade is valid, there is no reason to tinker with the exit strategy. Stop-loss levels may, however, be altered once the share price moves in the anticipated direction.
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We would endeavour to answer as many queries as possible. However, constraints of space will limit the responses featured under this column.
(The analysis and opinion expressed in these columns are based on the technical analysis of the past price behaviour. Opinion and price targets are based on the Elliott Wave Analysis. The stop-loss level provided with the recommendation is important. The original view would stand negated if the stop loss level is breached. There is a risk of loss in trading)
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