Most people are used to seeing majority of their stocks on upside circuit but on Friday, majority of the stocks were on the downside circuit. The trigger of the sell-off was probably due to political turmoil in Pakistan. The Pakistani prime minister was overthrown and the country was under a state of emergency. The market did not like this and resultantly, the it collapsed. This is what is making rounds in the market. The most probable thing was that the market was flushed with buyers.

Buyers who were long far in excess of their holding capacity. With the slightest hint of instability, the market collapsed as all these people turned sellers. The market is a stern teacher. It does not tolerate indiscipline. The index opened with a huge gap on the upside and on Monday, the index formed a long black candle.

The market then staged a recovery only to see a huge sell-off on the last trading day of the week. On the weekly charts, the index has again formed a long black candle. A bearish pattern on the face of it. But looking at the surrounding price action, we offer a different view. The index broke out of its six month trading range and saw a relatively very fast move on the upside. The current sell-off may be seen as a pullback of the breakout from the level of 4810 points.

This, in effect, would give those people who could not buy at the breakout a chance to get back into the market. Also one may recall that the level of 4810 points is a very strong resistance level. Thus on decline, this level of 4810 points is likely to act as a support to the falling index values. Also notice that there was a huge gap between the level of 4810 points and 4783 points. This is a rising window and the market could see a support around this level. If the index breaks below the level of 4783 points the index decline to lower levels.

What we expect is that there should be some sideways movement between 4810 points and 4922 points before the index picks up steam. We have not abandoned our bullish opinion on the market. The market is likely to rally higher. But that will have to wait.

Indicators are giving mixed signals. The MACD (Moving Averages Convergence Divergence) is still in a buy mode. The market may see a rally after some sideways action. Investors may consider being on the long side of the market in selected stocks.

Reliance Capital

The price of this stock is on a roll. The price has broken out of the Rs 65.95 its previous major stock. The price of this stock is set to reach newer heights. The price of this stock could rally to higher levels as this has broken out of a major rounding bottom. One may consider buying this stock at current levels for a major long-term appreciation in price. Keep a stop loss below Rs 56.

SAIL

This stock is also on the verge of a major breakout from its resistance level of Rs 12.60. The overall volumes have seen a very good increase in volumes. The price of this stock may rally to around Rs 18 once the price shows a breakout above Rs 12.60. One may consider buying this stock on break above Rs 12.60 for a decent increase in price. One may buy on breakout and keep a stop loss below Rs 11.50.

India Cements

The price of this stock has already shown a reversal signal. The price may rally to around 106.6 and on break out from this level the price may still rally to around Rs 125.

At current levels the price seems to be an attractive buy. One may buy this stock at current levels. Keep a stop loss below Rs 87.

Larsen & Toubro

The price of the stock has shown a breakout above he level of Rs 400 and after reaching the level of Rs 428 the price has declined a bit. The price of the stock may rally to higher levels during the week. One may buy with a stop loss below Rs 390.

Global Tele

The price of the stock may see a decline to around Rs 548 on break below Rs 580. One considers selling short this stock on break below Rs 548. Keep a stop loss above Rs 590.

(The author can be contacted at shahmani1@yahoo.com)