Now what constitutes a good breakout? First, watch the vigor with which the stock breaks out past the previous rally peaks attained while the base was being built. A stock that zooms past its previous resistance shows intense demand, which could take it a long way. Second, the stock's long term moving average - 30 weeks moving average (30 WMA) must stop declining and then start to round under as evidence that the direction of the major trend is changing. Remember: do not trust a breakout if it does occur when the moving average is still far above the base and continuing to decline sharply.

Thirdly, and perhaps most important, is the volume check. As the stock breakout of the base, it must be confirmed by heavy buying. A breakout without volume is likely to fizzle. Therefore, its vital that much higher volumes come in at the point on of breakout as compared to the volumes during the basing period.

Usually, I look at a particular sector or a group in my article. But there are a few stocks, which have vivid diversified activities and are not listed in a particular sector. Many of these stocks are worth watching as they are likely to bottom out soon and are poised to move up fast once the major trend of these stocks turn up. Thus I will today look at a few stocks from the diversified sector which technically look quite interesting.

Grasim Industries
Grasim Inds has been staying below its falling 30 WMA and, hence, the major trend of the stock is down. However, recently the stock's relative strength has been exhibiting signs of improvement indicating that the stock's decline has been lower that the rate of decline by the indices. This is the reason that the relative strength line for the stock has moved above its trigger line. However, as the major trend of the stock is still down and investors must currently stay away and keep on watching the stock for an upside breakout. As explained above, the beat time for an investor to get into the stock is when the stocks breakout on the upperside with a rise in volume. This will also mean that the stock will move above its 30 WMA and the next intermediate uptrend in the stock must be used to get into the stock.

The stock is in a major downtrend since October 1999 and if it is able to bottom out here, higher levels will be seen by the stock soon. The stock will also exhibit higher major bottoms which is a very bullish sign, indicating that the next major high is also likely to higher than the earlier intermediate high.

Reliance Industries
Reliance Inds is also one of the few stocks which is listed in the diversified sector. The stock is one of the very stocks which still trading above its 30 WMA and has been exhibiting a very bullish relative strength. The stock has a major resistance at the 380 level and a support at the 30 WMA. The bullish relative strength exhibited by the stock means that the stock is outperforming the indices.

The higher levels in the relative strength line means that higher levels will soon be seen by the stock and once the stock moves past the 380 levels, higher levels will be seen and the momentum will be higher. Thus, investors must hold on to the stock and more long positions in the stock can be added in the next intermediate rise. The earlier intermediate bottom is far away and unless there is breakdown below the 30 WMA with a rise in volume, investors must stay invested.

Jaiprakash Industries
Jaiprakash Inds has been staying below its falling 30 WMA and has been exhibiting lower intermediate tops and bottoms since December 1999. Thus, the major trend of the stock is down. However, the stock is well above its earlier major bottom and its earlier intermediate bottom and is well poised to shoot out for the current levels. However, till such time the stock zooms past the 30 WMA and the descending trendline with a spurt in volume, investors must stay sideways and watch for the right time to get into the stock. If an investor may get in now, he may get frustrated and get out just before the stock will zoom up. Hence, it is better to get in at a little higher level, than to get in now.

Birla 3m
Birla 3m is one of the few stocks currently which is still in a major uptrend and is very close to the earlier major top while the indices are closer to their earlier bottoms. Thus, the relative strength of the stock is very bullish and investors must continue to hold on to the stock. The stock is trading above its 30 WMA and more long positions in the stock can be added when the stock pulls back towards its 30 WMA. The trading volume of the stock has been quite thin and, hence, the jobbing spread is large. Hence, investors must not pick up large quantities in the stock.Novartis
Novartis is staying above its 30 WMA but the stock has not been above to move up strongly with a rise in volume. Infact, the stock has been exhibiting low volumes as it consolidates above the 30 WMA. The major trend of the stock is down as it is still well below its earlier intermediate bottom. However, if the stock moves up with a spurt in volumes from the current sideways mode, higher levels in the stock will be seen soon as the relative strength line for the stock is already bullish and is well above its trigger line. However, investors must not get in now and must get in only after the stock signals a strong move on the upperside. Ensure the move is accompanied by a rise in volume as compared to the recent trading volumes.