Regular readers of my analysis are well aware of the importance of technical analysis, not only in short term and medium term trading, but also in investments. With the indices dropping below their earlier intermediate bottoms in the beginning of the current month, we are in a bear market. This bear market will be confirmed once the current intermediate rally which has started on November 2 terminates below the earlier intermediate top.

Also, the activity in majority of the sectors is lustreless and only a few sectors have been active. Majority of the stocks in the cash section are not participating in the current intermediate rally and hence, for investors therewere very few opportunities on the long side.

However, in the coming week we saw a sudden rise in the activity in the refinery sector and technicals have very nicely signaled a buy. The non-weighted refinery sector index bottomed out in April and since than the index moved past its 30 WMA as can be seen from the index graph.

The index that I have been using are all non-weighted indices. A non-weighted index for the sector gives us a better picture of the performance of the sector as compared to the weighted indices.

Weighted indices are made up of selective stocks while in a non-weighted index all stocks count equally. Thus, the weighted index presents a distorted view of what is really happening while there is no fooling around in case of a non weighted index.

Professional investors and stock traders know that one of the keys to successful stock selection is being right about the industry. Studies suggest that overall market performance is the biggest contributor to a stock's return. The stock marketis more than a collection of individual stocks. Stocks tend together naturally into business or industry groups. Stocks, like sheep, move in herds. If you want your sheep to move north, you had best pick a sheep in a herd moving north.

There is always a chance your sheep may stray. But the odds are that you should put your money on a sheep in a herd that's going your way. There was an excellent buying opportunity in the last week in the refinery sector as majority of the stocks went into a fresh intermediate rise with a shoot out in volume. The spurt in volumes suggested the urgency that the investors were in while picking up stocks in this sector.

BPCL
Bharat Petroleum Corporation bottomed out in April along with the refinery index and moved past its 30 WMA line within a few weeks. The stock was consolidating for a couple of months and in the last week all the stocks moved into an intermediate uptrend with a rise in volume, which was a very bullish sign.

In the past we have seen activity witha rise in volume in only a few sectors and after a long time there has been a spurt in the refinery sector with majority of the stocks moving up. The relative strength line for the stock was already above its zero line since May 1999 and was staying above its zero line.

With the stock going into a fresh intermediate uptrend, the relative strength line has been zooming upwards. Investors must hold on to their long positions in the stock while any minor decline must be used by traders to add to their long positions in the stock.

The stock is now in the new high territory with very few resistances on the upside. The next important resistance levels are at 425 and 485 and once the stock crosses these levels, it will be in an all time high territory.

HPCL
Hindustan Petroleum Corporation is also in the new high territory as the stocks has also zoomed ahead in the last week along with majority of the stocks in this sector. Again with the sector index also zooming ahead and already making a new high;there is a good possibility that many stocks in this sector will also follow suit and higher levels are expected in the sector.

As explained above, whenever a sector is outperforming the indices and when majority of the stocks have already bottomed out, there is a good opportunity for investors to add to their long positions. The stock took a support at the rising 30 WMA and has now been moving up and any minor decline in the stock must be used by traders to add to their long positions. Investors must continue to hold on to the stock as higher levels will be soon seen in the stocks in these sectors.

Indian Oil
Indian Oil has similar formations in April as the PSUs in these sectors bottomed out almost at the same time and are in a major uptrend. The stock has also recently gone into a fresh intermediate uptrend but has still to move past the earlier intermediate top 325 to enter into the new high territory.

Once the stock crosses this top, higher levels will be seen by the stock as there willvery few resistances to pause the stock. However, with all the stocks in this sector outperforming the indices, the stock is poised to make a new high shortly. Investors must hold on to the long positions in the stock.

Madras Refinery
Madras Refinery took a support at the long term moving average i.e., 30 WMA and was the first stock in this sector to go into a fresh intermediate uptrend recently. The stock has been outperforming the indices and with the stock hitting the upper circuit on almost all the days in the last week, higher levels will be seen in the stock soon.

The major trend of the stock is up and investors must continue to hold on to their long positions in the stock. The next strong resistance to the stock is at 80 where earlier two major tops were formed. However the relative strength line for the stock has already made a new high suggesting that the stock will also follow suit.

RPL
Reliance Petro was the first stock to bottom out in this sector and the stock has beenoutperforming the indices. The major trend of the stock is up as the stock continues to exhibit rising intermediate tops and bottoms but in the recent intermediate rise, the stock has been lagging behind.

Investors must hold on to the stock with a stop loss at 46. The recent lustreless conditions in the stock has resulted in the relative strength moving down, but it is still well above its zero line indicating that the overall rise in the stock was quite higher as compared to the other stocks in this sector and the indices.

Cochin Refinery
Cochin Refinery has been moving between 130 and 170 since the past year and hence the major trend of the stock has been defined as sideways. A close above 170 with a rise in volume will result in the redefining the major trend of the stock.However, investors must hold on to the stock and more long positions can be added once the stock breaks out of the current long sideways move.

Like the other stocks in this sector, the stocks has been rising recently witha spurt in volume which is a very bullish sign.