JANUARY 14: On Friday January 14, 2000, the BSE Sensex ended the week at5471 points. The index made a net gain of 60 points over the close of theprevious week. The market was, for the most part of the week, very volatile.In fact, too volatile for comfort. The market made huge swings during theweek and the volatility was almost uncontrollable. The heavy volatility ofthe week was accompanied by a sharp drop in overall volumes in the market.This is a sure sign of a market in the middle of a protracted sidewaysaction. The economy has revived and it is showing signs of picking up steam.The latest figures suggest that several key sectors in the economy areimproving.If this is the fundamental driving the market, then the market hasa long way to go up. The foreign investors are very active in the market andgoing by the way they are investing, there is a lot of money remaining to beinvested in the market.
Seemingly, the FIIs do not seem to be too worried about the recent happeningin the recent past if the net investments of the FIIs in the last couple ofdays are any indication. The FII will to pump money is there and theconditions are attractive; the only gap to be filled in is time. It is onlya matter of time before the market starts to go up. During the week'strading, the market was range-bound and the index moved sideways between5668 points and 5184 points. In this range-bound market, the index movementwas very volatile. The market movement during the day was often more than200 points and this extreme volatility for some would have been unbearable.
The case in point was the trading on Wednesday and Thursday. The index wasrolling up and down and swings of 50 odd points used to take place in matterof minutes. Such high volatility can be a very unnerving experience for mosttraders. Only those who are willing to endure huge intra-day swings andthose who are lion-hearted will prosper. The best things to do in suchcircumstances are to ride out the storm by sitting on the sidelines andwatching the fun. The index has formed a bearish candlestick line for theweek. This pattern is called as the 'Bearish counter attack line' and it isusually a sign that the index could show a decline or it could go a bit sideways.
The most likely action is sideways movement between 5184 and 5668 points.This is the most likely course of action. On Friday, the index formed asmall-bodied pattern. This was the 'star', a sign of indecision in themarket. This is another sign that the index could go a bit sideways for somemore time. There is not much of analysis to be made. The major trend of theindex remains up. And the market, in its current state, is just taking abreather after sprinting ahead in the last week. The MACD (Moving AveragesConvergence Divergence) has turned its direction but it remains in a buymode.
The RSI (Relative Strength Index is showing signs of deterioration as it isshowing some signs of negative divergence. The market is likely to show somesideways action between 5184 and 5664 points. It will be some time beforethe index starts to go up again.
ICICI
The price has just broken above the resistance level of Rs 126. This is abig resistance level and the price has managed to break above it with a verystrong increase in volumes. The price could rally to higher levels in thelong term and it is possible that the price may reach a level of Rs 220. Onemay buy the stock at current levels with stop loss below Rs 105.
Bata India
The break of the falling trendline has coincided with the weekly MACD givinga buy signal. The price has also seen a heavy increase in volumes. Thecrucial break-out level is at Rs 155 as this level finds resistance bothfrom the falling trendline and from the highs that the price registeredduring the month if November. The price of this stock may see a rally toaround Rs 225 and this should be considered as a long-term investment. Onemay buy with a stop loss below Rs 135.
Sterlite
The price of this stock has been in a wide trading of Rs 326 to Rs 475 foralmost a year now. The price could see a big rally if it breaks above Rs475. One may buy this stock only if it shows a break above Rs 475 and theprice does show a potential to rally to around Rs 525 in the medium term.One may buy this stock once it breaks above Rs 475 one may buy on breakabove Rs 475, with a stop below Rs 450.
Digital Equipments
The price has formed a pattern called as an 'inside day'. If the pricebreaks below the level of Rs 1326, it could decline to lower levels. Tradersmay see short if price shows a break below Rs 1326. Keep a stop loss belowFriday's high of Rs 1404.
ITC
The price moves in a range of Rs 867 to Rs 945. Traders may play the rangethat is, buying around Rs 867 and selling around Rs 945. The price isexpected to go sideways between Rs 945 and Rs 867. One may consider buyingaround Rs 867 and sell around Rs 945. Keep a stop below Rs 840.
(The writer's e-mail address is shahmani1@yahoo.com)
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