How can I cover water stains on this wall
What you need is a good oil based primer like Kilz.



Put about 2 coats to cover the stains completely.  After this has dried completely you can touch up with latex based paint and this should prevent any further stains from seeping through.

Regular latex based primers are not going to do a good job of hiding previous water damage.  It may cover for a few weeks but eventually the stain will come back.

NOTE: Just make sure that you have addressed the source of the water first.  This shouldn't be used to sweep a problem under the carpet.  If the water damage continues then this will not help you.