Banking: making a come back

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: A strong bounce back by the indices on Thursday and Friday wiped out all the loses of the first three days in the last week as global markets have started to improve after oil prices cooled off. The chart of oil suggests that it has made a double top formation, indicating an intermediate top formation, and some cooling off in the next few weeks. Boiling oil was one of the reasons for the current intermediate downtrend since March and now, with oil charts forming an intermediate top, an intermediate rally is likely to be seen here and other markets around the world.

Locally, we have another big hurdle on July 22 and this is the trust vote by the government. Once this hurdle is gone, we could either see the continuation of the gains in the past two trading days or if the government is not able to get 272 seats, than we could see one more sharp fall and a continuation of the intermediate downtrend. The targets for the Sensex and the Nifty to get back into a fresh intermediate uptrend are at 14,066.36 and 4,215.50 respectively. The equivalent target for the CNX Mid Cap index is at 5,405.65.

The intermediate downtrend is more than two and half months old and if the d-day on the July 22, passes by with the government getting the required number of seats, than we could see the recent minor bottoms attained on July 16, will also become an intermediate bottom. The daily momentum indicators for the indices and many stocks have been exhibiting a bullish divergence indicating that the bears are becoming weaker. Also, the strong rise in the past two days suggests some bear covering and a possibility of an intermediate rally.

The earlier intermediate top for the Sensex is at 17,736 and for the nifty it is at 5,298.85. These levels are quite far away and unable for the indices to cross in the next intermediate rise also suggesting that the next intermediate rise will be a rally within the major downtrend. The equivalent level for the CNX Mid Cap index to get back into a major uptrend is at 7,192.40.