Here are answers to readers’ queries on the performance of their stock holdings.
I bought L&T for ₹1,650. Can I average it at the same price? I also purchased BHEL at ₹260. Should I sell it?
While consolidating sideways for more than one month, the stock recorded a 52-week low at ₹1,016 in early February.
There was an increase in volume during this sideways movement. Moreover, the weekly relative strength index displays a positive divergence that indicates trend reversal.
Recently, the stock decisively broke through its 21 and 50-day moving averages and a key resistance at ₹1,150, which are positive signs.
You can consider averaging the stock at the current levels or at minor declines with a stop-loss at ₹1,050. It is on the brink of a trend reversal. Strong rally above the near-term resistance at ₹1,220 can take the stock up to ₹1,300.
This will indicate that the short-term trend has reversed upwards. Next key medium-term resistances are at ₹1,350 and ₹1,450 levels. A significant long-term resistance as well as 50 per cent Fibonacci retracement level of the downtrend is pegged at ₹1,450.
Therefore, the stock can face some difficulty to move past this level at one go. One can consider taking partial profits at this level. Subsequent key resistances above ₹1,450 are placed at ₹1,600 and ₹1,750.
On the downside, a decisive fall below the immediate support level of ₹1,070 can drag the stock down to ₹1,000 or even to ₹900 in the medium term.
BHEL (₹103.6): Since encountering a key resistance at ₹290 in late July 2015, the stock of Bharat Heavy Electricals (BHEL) resumed its primary downtrend and has been on an intermediate-term downtrend.
After a 69 per cent fall from this peak in February 2016, the stock found support at ₹90, which is a multi-year low. The stock has moved above its immediate resistance at ₹100 and hovers above it. The daily relative strength index shows positive divergence implying trend reversal is on the cards.
If you are an investor with high risk appetite, you can consider averaging the stock at current levels with a stop-loss at ₹85. The stock can trend northwards and encounter resistance at ₹150 and then at ₹175.
There will be difficulty in breaking through the key long-term resistance band between ₹190 and ₹200. So, one can consider booking profits at that level. Next resistances are at ₹240 and ₹290.
Investors should avoid taking fresh positions on a decisive fall below the immediate support level of ₹90 as it will be tough to foresee where the stock will find its base.
I hold shares of Karur Vysya Bank bought at ₹460. What is the outlook?
CS Swaminathan
Karur Vysya Bank (₹411.3): Taking support at around ₹400 in late February, the stock is trying to move upwards. But it faces an immediate barrier at ₹425.
A decisive break out of this level can take it higher to ₹440 or ₹450 levels in the short to medium term. The stock needs to emphatically break the key long-term resistance at ₹450 to alter the medium-term downtrend. Targets on a strong rally above ₹450 are ₹470 and ₹500.
The stock has been on an intermediate-term downtrend since hitting a resistance at ₹618 in March 2015. To alter this downtrend, it needs to conclusively break through the resistance zone between ₹500 and ₹510. Subsequent targets are ₹540 and ₹575. But a downward breach of the support at ₹400 can strengthen the downtrend and drag the stock down to ₹375 and then to ₹350 in the medium term. Therefore, avoid taking fresh positions on such a fall.
Send your queries to techtrail@thehindu.co.in