Chances of the market showing a decline are still strong enough
Manish Shah
MUMBAI, Dec 28: On Friday December 26, 1997 the BSE Sensex closed at 3633.38 points, showing a net gain of 92 points over the close of the previous week. The `Santa Claus' rally that the market has witnessed in the last couple of weeks brought some respite to the investment community. Several stocks have registered smart gains and the overall mood in the market has been optimistic. At the fag end of the calendar year substantial purchases have been made by major institutional investors in spite of the overall uncertain political situation in the country. Though the outcome of the forthcoming elections remain uncertain, the BJP party seems to be gaining in confidence as each day passes by. The Congress faces a looming threat of a split as several of its leaders are dissatisfied with the party's current leadership. As the BJP prepares for its most ambitious elections, the Congress would be rueing its decision to withdraw its support to the UF government. Notwithstanding the current political imbroglio the
country's financial market are preparing for a facelift. The RBI has mooted proposals to introduce gold bonds which would be a stepping stone to introducing futures and options in the gold market. Similarly, the NSE is all set to introduce index based futures and it is also considering setting up a mechanism to introduce futures market in commodities. In the years to come, a speculator in India will be able to trade in different markets as opposed to only the equities now. Coming back to the markets, after a very strong session on Monday the market faced some resistance at the level of around 3650 points. Last week it was mentioned that the Sensex could face resistance at this level. The rally seems to be petering out at this level as in the following three sessions the market has formed three small bodied candles. In fact, Tuesday's trading session was a `near doji'. A `doji' just below an important resistance level signals a reversal of trend. If Monday's session is a long black candlestick the market
should stage a decline. But if the market manages to rise above the level of 3650 points it could still advance till around 3750 level. The indicators suggest that the market is temporarily in an overbought zone. The 12-day ROC (Rate of Change) is in the overbought zone. The MACD (Moving Averages Convergence Divergence) is just below its equilibrium level. The market has still not given out a signal for a sustained up trend. The chances of the market showing a decline are still strong enough. Fulford (India): Bullish This one is another of the pharmaceutical stocks that seems to have a good potential. The stock has started moving up after forming a higher bottom at around Rs 140. The weekly MACD has been rising and is in a buy mode. The stock faces a very strong resistance level at around Rs 206 and once this level is surpassed the stock could rise to higher levels. Investors may consider investing in this stock once the price manages to rise beyond this level. One may then keep a stop loss just
below the level of 200. Digital Equipment: May rise This stock is currently at its very strong support level of Rs 124. The week before last in this stock formed a hammer at this very level. A hammer is a bullish candlestick pattern. The 12-week ROC has started to move up from its oversold zone. Over a medium-term the stock does have the potential to move up to around Rs 200. One may invest. Keep a stop loss below Rs 120. Bausch & Lomb: Good potential This stock is currently poised at its rising trendline and has started moving up. The volumes also show a bit of a rise. The MACD line has shown a small up turn though the buy signal is not yet forthcoming. The stock could rise to its earlier rise of Rs 100 over a medium-term. One may buy keeping a stop loss level below Rs 50. BSES: Sell short This stock has formed a bearish harami pattern just below its resistance level of Rs 177 giving a signal to sell short. This level is a significant resistance level and from this level the
stock could decline. One may sell short. Keep a stop loss above Rs 177. ACC: Buy long ACC has shown a break out of its resistance level of Rs 1340. The last trading session of the week was a strong candle. This stock does have the room to advance further. Traders may buy long. Keep a stop loss level below Rs 1340.
Copyright © 1997 Indian Express Newspapers (Bombay) Ltd.
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