Query Corner :Business Line

December 24, 2011:  

I would like to buy shares of Shree Renuka Sugars. At what price should I buy them?

Abdul Nadaf

Shree Renuka Sugars (Rs 26.1): In our review of Shree Renuka Sugars in July this year, we had written that the stock was attempting to hold above the critical band between Rs 51 and Rs 60, and investors should exit on a breach of this band. Target on a break-down below this band was given at Rs 45 or Rs 31.

The stock penetrated the aforementioned band in November and has dropped like a stone since then to the recent low at Rs 22. Long-term support in the vicinity is the October 2008 trough at Rs 20, and this should serve as the stop loss for investors still holding on to the stock.

Investors with a greater risk taking ability can buy the stock in the band between Rs 20 and Rs 25 with stop at Rs 19. Next long-term support is the 2007 low at Rs 13.6.Short-term resistance will be at Rs 35 and Rs 45.

The medium-term view will, however, turn positive only on a close above Rs 60. Subsequent resistances will be at Rs 74 and Rs 86.

Please discuss the medium- and long-term outlook of Siemens.

Anil

Siemens (Rs 657.5): Siemens rose at a fast clip up to July when it recorded the peak of Rs 951. In our previous review, we had expected the stock to continue its stellar rise following some sideways movement in the range between Rs 1,000 and Rs 1,125. But it is moving lower since July in a medium-term correction.

The stock is, however, halting at its first medium-term support at Rs 650. If it continues to hold above this level, it will be a positive from long-term perspective.

The stock can then spend some time in the band between Rs 650 and Rs 950 before moving higher to Rs 1,125 or Rs 1,414.

Supports on decline below Rs 650 are at Rs 570 and Rs 480. Long-term investors can hold the stock as long as it trades above Rs 480.

Canara Bank has been hammered to unbelievable lows. How much more downside remains? Please advise.

Krishnamurthy

Canara Bank (Rs 363): Key long-term support for Canara Bank that occurs at 61.8 per cent retracement of the rally from March 2009 low, occurs at Rs 400. The stock declined below this level recently.

It is, however, not right to panic yet, since the stock could form a long-term low in the vicinity of this support — in the zone between Rs 350 and Rs 400. Investors with short- to medium-term perspective can hold the stock with a stop slightly below at Rs 320.It would be best to exit the stock once this level is breached since the next stop can be at Rs 250.

Resistances for the months ahead would be at Rs 540 and Rs 660. Failure to move above the first resistance would be an indication of weakness. Long-term view will turn positive only on a strong move above Rs 660.

Please specify the nature of trend and support levels for Blue Dart Express and Kaveri Seed Company.

Altaf hussain

Blue Dart Express (Rs 1,488): The structural trend in Blue Dart reversed higher in the first quarter of 2009 and this trend continues to be firm. The stock is, however, in a medium-term correction that can pull it down up to Rs 1,250 in the months ahead.

This can be the stop-loss for investors. Sideways move between Rs 1,250 and Rs 1,850 for few months will also be construed as positive for the long-term outlook of the stock since it will indicate a propensity to move up to Rs 2,200 over the long-term.

Long-term view will, however, be marred on a dip below Rs 1,250. It will mean that fall to Rs 1,112 or Rs 950 can happen before the stock stabilises. Investors who are in the stock for the long haul can stay put as long as it trades above Rs 950.

Kaveri Seed Company (Rs 459): Kaveri Seed Company is moving within a well structured trend channel since February 2009. Needless to add that the long-term trend in this stock is up. It, however, faced stiff resistance around Rs 500, and it could not move above this level despite multiple attempts between July and December this year.

Investors wishing to buy this stock can, therefore, wait for a close above Rs 500 before doing so. Subsequent target would be at Rs 625.

The lower boundary of the aforementioned trend channel at Rs 400 would act as a short-term support for the stock. Breach of this level will drag it lower to Rs 350 or Rs 310. Investors can buy the stock in declines with stop at Rs 350. The positive long-term view will be roiled only on a close below this level.

I am holding Sesa Goa purchased at Rs 369 and Shiv-Vani Oil at Rs 433. Should I hold these stocks or exit?

P.M. Rao

Sesa Goa (Rs 161.6): Sesa Goa is a very volatile stock given to sharp swings in both directions. The uptrend that made it surge strongly from the bear market lows ended at Rs 495 in April 2010 and the stock is plunging lower once again.

It has crashed below its key long-term support at Rs 226 in October. That makes the re-test of its November 2008 low at Rs 60 likely. Investors with a lower risk appetite can switch out of the stock at this juncture and consider re-investing on a move above Rs 226.

Medium-term resistances will be at Rs 230 and Rs 280. Medium-term view will turn positive only on a close above Rs 280. Subsequent resistances are at Rs 321 and Rs 363.

Shiv-Vani Oil & Gas Exploration Services (Rs 186.4): Long-term trend in Shiv-Vani Oil & Gas has also turned lower since it is currently trading below its long-term support at Rs 240.

The stock is attempting to stabilise in the support band between Rs 150 and Rs 160.

If this band is breached, the stock can decline to Rs 88. Investors with lower penchant for risk can switch out of this stock at this point. Others can hold as long as the stock trades above Rs 150. Key resistances for the months ahead would be at Rs 290 and Rs 360. Those holding the stock can divest their holding at either of these levels.

Can you advise medium-term potential of Axis Bank?

Sridhar

Axis Bank (Rs 878.5): Axis Bank is in doldrums since the October 2010 peak at Rs 1608.

There has hardly been any respite for investors as the stock kept registering lower troughs and peaks. But the long-term trend in the stock continues to be up since the long-term trend decider at Rs 800 is still intact. Next support band for the stock lies between Rs 600 and Rs 800.

Investors can hold the stock as long as the abovementioned support band holds. But once the support at Rs 600 breaks, it can be a disaster, since the next support is way below at Rs 278. Medium-term resistances are at Rs 1,100 and Rs 1,300.