SELL GUJARAT NRE COKE & TAKE PROFITS FROM HCL INFOSYSTEMS

Investors with medium-term perspective can consider selling Gujarat NRE Coke (Rs 52.1). The company manufactures and sells low ash metallurgical coke.

After encountering key resistance around Rs 94 in January 2010, the stock reversed direction and began to decline. Later in March as well as April, the stock failed to surpass this resistance and resumed its downtrend. In early May, the stock declined sharply conclusively breaking through its long-term uptrend-line that was in place from March 2009 low of Rs 16.8, an initial sign of trend reversal.

Since April, the stock has been on an intermediate-term downtrend. The stock tumbled 21 per cent in third week of May emphatically breaking through an important longer-term support at Rs 70. On November 26, the stock plunged almost 8 per cent penetrating the lower boundary of sideways consolidation in the range between Rs 55 and Rs 70. This was accompanied with above average volume.

The stock is hovering well below its 50 and 200-week moving averages. The 14-day relative strength index, which determines the speed and alteration of price movements, is featuring in the bearish zone and the weekly RSI has entered into the bearish zone from the neutral region. Both daily and weekly moving average convergence divergence oscillators are hovering in the negative territory, implying downward momentum. Moreover, weekly MACD has signalled a sell.

Considering these facts, we are bearish on the stock from a medium-term perspective. We believe that the stock has potential to continue its downtrend further until it hits our price target of Rs 44 in the coming weeks. Investors with medium-term perspective can consider selling the stock with stop-loss at Rs 56.5.

Follow up – HCL Infosystems (Rs 86.5)

The stock plummeted 11 per cent in previous week, in line with our expectation. It recorded an inter-week low of Rs 83.5, which was just above our medium-term price target of Rs 80. As its decline was steep and the daily indicators have entered deep oversold territory, the stock could witness an up-move, hence, we advice investors to take profits off the table at this juncture.

(This recommendation is based on technical analysis. There is a risk of loss in trading.)

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