GMR - What the charts say

In your last review of GMR Infra on March 22, 2009 you had discussed about the target of Rs 135 for the stock. Kindly explain your updated technical view on the stock. Amit Shanker

GMR Infrastructure (Rs 146.7): The target at Rs 135 indicated in our last review was a formidable resistance since it occurs at 38.2 per cent retracement of the down-move from the December 2007 peak and it also coincided with the March 2008 trough. GMR Infrastructure struggled to move past this level for one month from April 2009.

However, the post election result outburst made the stock soar above this resistance to the peak of Rs 183.

Upward targets for the stock above Rs 135, based on retracement levels were Rs 158 and Rs 184. After reaching the target level at Rs 184 on June 5, the stock made a downward reversal. Fresh purchases are recommended in this counter only on a weekly close above Rs 184.

The current decline can pull the stock lower to Rs 130 or even Rs 100 over the next three months. Conversely, a move above Rs 184 will clear the way for a shy at the previous high of Rs 269.

Medium-term investors can buy in declines as long as the stock holds above Rs 130. Long-term investors can hold with a stop at Rs 100.

I have purchased Coromandel Fertilizers at Rs 190 and Electrosteel Casting at Rs 39. What are the chart indications for these stocks? Meena A Desai

Coromandel Fertilizers (Rs 197.8): This stock has been on a gravity-defying run ever since the low of Rs 81 formed on March 9. It recorded a new life-time high of Rs 230 on June 4 and is currently in a short-term correction.

The long-term trend in Coromandel Fertilizers continues to be up.

The correction in 2008 did not drag the stock below the key long-term support at Rs 80. Key support to watch in immediate future is Rs 187. A strong weekly close below this level will usher in a correction to Rs 174 or even Rs 140 over the medium-term.

Conversely, if the stock consolidates in the band between Rs 187 and Rs 230 for a few more weeks, it can provide the base for the next leg higher to Rs 270 over the long-term.

Long-term investors can therefore buy in declines with a stop at Rs 135. Short-term investors should divest their holdings on a close below Rs 180.

Electrosteel Casting (Rs 29.9): This stock reversed downwards from the recent peak at Rs 41.7 formed on June 5. Medium-term targets for the rally from the March lows were Rs 41 and then Rs 47. Since Electrosteel Casting had already reached the first target, a medium-term peak could have been formed at Rs 41.7. The down-trend that began from this peak can now drag the stock down to Rs 25 or Rs 20.

Investors with a short to medium-term horizon should therefore divest part of their holdings at current levels and hold the rest with a stop at Rs 24. A sharp rally above Rs 47 is required to take the stock to Rs 64.

I am holding IOC purchased at Rs 600 per share. Please give the long-term outlook for this stock. Chirag Doshi

IOC (Rs 551.8): Indian Oil Corporation has not gone anywhere over the past five years; vacillating in a Rs 300 band between Rs 300 and Rs 600. Though the stock dashed beyond Rs 600 in December 2007 to form the peak at Rs 810 on January 4, 2008, the speed with which it declined to Rs 355, by January 25, 2008, underlines the fact that the zone around Rs 600 continues to be strong supply-zone for the long-term.

IOC is once more reversing lower from this zone since the first week of June. A reversal from here can drag the stock down to Rs 520 or Rs 440 over the next three months.

Move below Rs 440 will pave the way for the decline extending to Rs 300.

Investors with a short to medium-term perspective should therefore divest their holdings if the stock fails to rise above Rs 650. A strong close above Rs 650 will give the next target of Rs 810 for IOC.

I had posted a query on Oracle Financial Services some time back. It has crossed the target of Rs 1,100 you had indicated recently. What are the revised price targets for this stock? Vageesh

Oracle Financial Services (Rs 1,229.3): This stock formed a double bottom around Rs 400 in October and December 2008 and has been soaring merrily higher ever since. As you have pointed out, Oracle Financial Services has surpassed the target we had indicated in our review of this stock in March.

Immediate resistance for the stock is around Rs 1,300. It is currently struggling to break-out strongly above this level. A strong weekly close above Rs 1,300 will take it to the next long-term targets of Rs 1,550 and Rs 1,800. Of these, the area around Rs 1,550 will be formidable resistance for the rest of this year.

Supports for the medium-term would be at Rs 1,000 and Rs 800. Short-term investors can buy in declines as long as the stock holds above the first support.

I want to know the prospects of Tech Mahindra bought at Rs 718. Mrityunjoy Chowdhury

Tech Mahindra (Rs 760.6): This stock has more than doubled in value in the vertical rise witnessed since the beginning of May. This rally has taken the stock past the key medium-term resistance at Rs 614.

If the stock sustains above this level over the next couple of weeks, it can be assumed that the stock has rally higher towards the next medium term targets at Rs 960 or Rs 1,130.

Investors should watch out for reversal from the zone between Rs 900 and Rs 950 since this occurs at 38.2 per cent retracement of the down-move from January 2007 peak and also coincides with the peak formed in May 2008.

Short-term investors can hold with a stop at Rs 600 while medium-term investors can hold with a deeper stop at Rs 450. 24-month target for the stock is Rs 1,340.

I have purchased GTL Infra at Rs 49 What are the short and medium-term targets for this stock? Ravikumar Adepu

GTL Infrastructure (Rs 40.1): GTL Infrastructure encountered its key medium-term resistance at Rs 49 in early June and has been on a short-term down-trend.

The stock could spend a few more weeks oscillating in the band between Rs 38 and Rs 45. Investors with a short to medium-term perspective can hold the stock with a stop at Rs 37. If it sustains above Rs 38 over the medium-term, the rally can extend to Rs 52. We do not envisage a rally past this level over the next 12 months.

Investors are advised to divest their holdings on a move below Rs 38 since that would signal an impending decline to Rs 33 or Rs 28 over the medium-term.