A nice come back for the bulls in 2009 after the drubbing they got in 2008. The Sensex saw a gain of 81.03% and the Nifty ended 75.76% higher. Among the sectors, the BSE Metals index was the largest gainer ending 233.68% higher and was followed by the BSE Auto index which gained 204.16%. The least gainer in the last year was the BSE FMCG index which gained 40.46% and was followed by the BSE Health Care index which gained 68.30%. The other indices which had outperformed the Sensex were CNX IT index which gained 116.04%, BSE Capital Goods index which gained 104.26%, the BSE Consumer Durables which gained 97.80% and the BSE Bankex which gained 88.51%.

In the past weeks, the indices have been exhibiting a slower rate of rise and as a result the weekly MACD indicators have been exhibiting a negative divergence. This suggests that the upside momentum has reduced. After the strong rise seen by the indices in March, a pause or a drop in momentum is expected and has been happening since October. Does this result in a reversal or will the indices breakout on the upper side. To answer these questions, we will look at the important support and the resistance levels which will help us in deciding the fate of the major trend.

The Sensex is facing a strong resistance near the October highs and end it did cross the same on the December 31., it was unable to close past it. The Sensex will have to move past the strong resistance zone between 17,500-17,554 and the Nifty past 5,200-5,237 for it to move higher and head towards the next weekly resistance of 17,816 and 5,304 respectively. On the lower side, as long as the Sensex stays above the weekly support of 16,640 and the Nifty above 4,948, the major uptrend remains intact. Only a close below these levels on a weekly basis will mean further weakness. Above the weekly resistance of 17,816 and 5,304 for the Sensex and the Nifty, the Sensex could be heading towards the next target of 19,258 and the Nifty towards 5,703. This can happen if we see the indices closing strongly past the resistance zones mentioned here.

On the lower side, the Sensex has a support of 17,085 and the Nifty has a support at 5,100. As long as any minor decline ends above these levels, the possibilities of the indices heading higher are more. A close below these levels will result in the Sensex heading lower towards the support of 16,615 and the Nifty towards 4,960.

In the short term, the indices are in an intermediate uptrend and a drop below 17,322.80 by the Sensex and 5,160 by the Nifty will mean a start of an intermediate downtrend. The Bollinger Bands for the indices are not at their minimal levels and hence a pull back towards the short term supports of 17,085 for the Sensex and 5,100 for the Nifty looks likely before these indices breakout on the upper side. Not many stocks are currently trending and a few sectors which are trending are the metals and the power sector. The metals have already seen a strong run up and I will look at a few power stocks today.

NTPC was an underperformer till the last month and was trading sideways between 200 and 220 for the past few months. In the last few days, NTPC has seen a sharp breakout and has gained about 20% in the past six trading sessions. This has been the first leg of the rise and a pull back in the coming week can be seen which will give swing traders and position traders an opportunity to look for long positions. The stock has a support at 230 and below this level it has a support at 222. Look for long positions after the first pull back. The strength of the current intermediate rise is quite strong and higher levels will be seen after a pull back. All the daily, the weekly and the monthly momentum indicators have turned up and higher levels will be seen soon.

Reliance Infrastructure has been underperforming the indices and hence the relative strength line is bearish. The stock has gone into a fresh intermediate uptrend and is at the important weekly resistance of 1,145. A strong close past this level will mean higher levels towards the next resistance of 1,303. The stock is in a strong intermediate rise since the past few days and the first pull back in the stock towards the support of 1,102 and 1,067 can be used by traders to pick up long positions. Currently the stop for the long positions is far away and swing traders and position traders must wait for a minor decline before they look for long positions. As the relative strength line is bearish, investors must stay away.

Tata Power is another stock whose performance is not bullish and has been performing in line with the indices. Majority of the Tata group of stocks have been out performers in the last year. Tata Power is in an intermediate uptrend and is at the first resistance of 1,387. A pull back towards the support of 1,345 can be used by swing traders and position traders to look for long positions. The next target for the stock is at 1,426.

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