The Sensex, CNX Mid Cap index and some of the sector indices made it to the new high territory closing past last week?s high, confirming that the intermediate trend is up and an intermediate bottom has been formed on October 22, with a Sensex low of 17,171. The Nifty has yet to close past its earlier intermediate top of 5,736.80 and will follow suit quite soon. Once the P-Notes issue was behind us and many frontline stocks bounced back, the intermediate uptrend was confirmed, and any minor correction in the coming week will be an opportunity to pick up long positions.
We have seen large bouts of high volatility in the past two weeks as the indices dropped into a fresh intermediate downtrend and now have again bounced back into a fresh intermediate uptrend.
The recent intermediate bottom made on October 22 is now important, and as long as the Sensex stays above the level of 17,171 in the next intermediate correction, the major uptrend remains intact.
The leader sector in the last week was the Capital Goods sector which gained 20.16% and was followed by the BSE Bankex which gained 16.25%. On the weaker side, the CNX IT was the largest loser, ending 1.42% lower and was followed by the BSE Healthcare index which gained 4.60%.
The market breadth was bullish throughout the week as the indices saw a vertical rise in the past five trading sessions, wiping out all the losses it had incurred in the last week.
The ?V? shaped reversal saw the indices make it to the new high territory, forcing the bears to cover their shorts. Trading volumes have started to improve in the past three trading sessions, indicating a rise in the bullish activity.
The targets for the Sensex and the Nifty to drop into a fresh intermediate downtrend are far away and are at the recent intermediate bottoms of 17,171 and 5,070 respectively. These levels will be raised after a minor decline is followed by a minor rise. The equivalent level for the CNX Mid Cap index to drop into a fresh intermediate downtrend is at 6,676.
Some Auto ancillary stocks look interesting and I will discuss some of these stocks today.
Bharat Forge was one of the leading stocks till 2006. Once the rupee started to make new highs, many export stocks have been facing rough times. Bharat Forge was one such stock as it went into a good correction in the past twenty months.
Now the stock has made a double bottom formation and has gone into a major uptrend with strong volumes. This is a bullish sign, indicating that the worst for the stock could be over and the stock is headed higher. The relative strengthline for the stock is also improving and will soon turn bullish. Any pull back towards the support of 305 in the coming week can be used by investors to pick up long positions in the stock. The stock has resistance at 356, 380 and 485.
Amtek Auto
Many auto ancillary stocks have been underperforming since the past few months, and this has resulted in a weak relative strength. Now, as activity in some of these stocks is picking up, the relative strengthline has started to improve. Amtek Auto made it to the new high territory ahead of the indices, suggesting that the stock has been outperforming the indices in the current intermediate rise.
The stock was trading between 335 and 438 in the past one year and has now broken out of this range, giving the stock a minimum target of 550 on the upper side. Thus any minor correction or a minor decline in the coming week must be used to pick up long positions in the stock.
Prem Auto Elec
Prem Auto Elec was already in a major uptrend as the stock corrected in the past few weeks to take a support just below the 10 WMA. The stock has now gone into a fresh intermediate uptrend and investors and traders can pick up long positions at the current price with a stop at 26.10.
The relative strengthline for the stock is already bullish and after pulling back like the indices, the relative strengthline has started moving higher. The next important resistance to the stock is at 38.50 and once the stock closes past this level, it will make it to the new high territory.
?For more details contact mayur_s@vsnl.com