Technicals- TCS, L and T, Jindal Steel, Vascon Engineers, Wendt, Tide Water Oil, :: Business Line

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What is your medium and long-term outlook on Tata Consultancy Services and Larsen and Toubro? Can these stocks be bought at the current levels?

Anil Kumar Ray

Tata Consultancy Services (Rs 1,450): TCS is in a structural bull market since 2009. The third phase of this long-term uptrend is in motion since the low of Rs 903 recorded in August 2011. Projection of this third wave gives us the first target at Rs 1,520 and the second target at Rs 1,869.

The stock is currently pausing after hitting the high of Rs 1,598, which is close to our first target. Key support level that needs to watched now are at Rs 1,335 and Rs 1,170.

If the stock manages to hold above the first support, it will imply that the stock could move higher to Rs 1,594 and onwards to its long-term target mentioned above.

Sideways move between Rs 1,330 and Rs 1,600 is possible for a few months before the stock attempts to break higher.

Larsen and Toubro (Rs 1,440): Larsen and Toubro is attempting to pull itself up from the low of Rs 971 recorded in December 2011. Following the peak of Rs 1,720 recorded in November 2012, the stock is currently in a medium-term corrective phase.

Investors can look out for a reversal from the support at Rs 1,320 or Rs 1,268 in the weeks ahead. Reversal from this zone will provide a good opportunity to buy the stock.

That said fresh purchases should be avoided on a move below Rs 1,268. For that will denote an impending slide to Rs 1,100 or even lower to Rs 1,000.

A significant long-term trough has been formed in Larsen and Toubro in December 2012. If this bout of correction halts above Rs 1,300, it will imply that the stock will move higher to Rs 1,740 or even Rs 1,970 over the long-term.

Resistance levels for the medium-term are positioned at Rs 1,600 and Rs 1,720.

Please advise on the medium and long-term outlook of Jindal Steel and Power and Vascon Engineers. Can I buy these shares at the current price?

Subir Raybarman

Jindal Steel and Power (Rs 242): Jindal Steel and Power is in a vicious downward spiral. Both medium and long-term trends in the stock are currently down. It would not be advisable to buy the stock at this juncture as there are no signs of stability or reversal in the charts yet.

It recently tested the Rs 200 level that is a psychological support. But the stock can breach this support and head lower towards the 2008 low at Rs 86. A firm weekly close above Rs 320 will be the first indication that the slide has halted in the short-term. You can then buy the stock with targets of Rs 410 or Rs 480.

The negative long-term view will be mitigated only on a strong close above Rs 480.

Vascon Engineers (Rs 25): It is not advisable to purchase a stock for the sole reason that its price has fallen. Stocks such as Vascon Engineers, whose stock price has lost 87 per cent in the last three years, should be shunned by investors.

Such protracted declines mean that there is a change in the fundamental factors affecting the stock price. Hoping that it will regain its previous peak of Rs 196 is not prudent.

Limited trading history of the stock makes it difficult for us to identify the next support on the chart.

A strong close above Rs 41 will be the first indication that the short-term trend is reversing higher.

Investors with a higher penchant for risk can buy the stock on a strong weekly close above this level with the medium term targets of Rs 51 and Rs 67.

I want to know your view on Wendt purchased at Rs 1,175 and Tide Water Oil.

Maheshbhai

Wendt (India) (Rs 1,035): You have purchased Wendt quite close to the level it is currently trading at. The stock has been in a steep medium-term decline since the peak of Rs 2,030 recorded in May 2012. But the good news is that the stock is halting at its key long-term support at Rs 1,000.

This level has multiple significance. Since it occurs at a significant Fibonacci retracement level, it is a psychological level.

Also the peaks in April 2006 and June 2007 occurred around this point. Investors can, therefore, hold this stock with stop loss at Rs 950.

Reversal from this zone will take the stock higher to Rs 1,300, Rs 1,400 or Rs 1,650 in the weeks ahead. The long-term ceiling at Rs 2,000 will however continue to thwart rallies over the next couple of years.

Tide Water Oil (India) (Rs 7,319): This stock is in a long-term correction since the peak recorded in September 2010. This correction is however halting at the key support level around Rs 6,000.

The stock reversed from this level twice, in March 2011 and again in December 2011. Long-term investors can hold the stock as long as it trades above this level.

Strong decline below Rs 5,600 will drag the stock to the next long-term support zone around Rs 4,700.

The stock faces medium-term resistance in the band between Rs 8,500 and Rs 8,800. Inability to cross above this level will keep the stock vacillating in the zone between Rs 6,700 and Rs 8,500. Stop-loss for investors with short to medium-term investment horizon can be at Rs 6,750.