After fourteen weeks of upward movement, the indices saw some correction in the last week as the intermediate trend turned down and the intermediate rise which had started on the March 6, has ended with a Sensex high of 15,600.30 and a Nifty high of 4,693.20. The mid cap index CNX nifty, also dropped into an intermediate downtrend after closing below the earlier minor bottom. The sensex lost 4.70% in the last week and the nifty ended 5.89% lower. The CNX Mid Cap index ended 4.41% lower. Among the sectors, the BSE Bankex was the largest gainer ending 1.98% higher and was followed by the BSE IT sector which gained 0.68%. On the weaker side, the
BSE Oil & Gas sector was the largest loser ending 10.68% lower and was followed by the BSE Reality sector which lost 10.16%.
In the last week, we had mentioned that many stocks had already dropped into an intermediate downtrend and the market breadth was weak, suggesting that the intermediate rise was facing hurdles at higher levels. Also, the Sensex has a strong resistance between 15,300 and 15,700 and the Nifty has a resistance between 4,650 and 4,800. These indices were unable to pierce these levels and have dropped into a fresh intermediate downtrend.
As the indices have been in a straight decline since June 12, the targets for the intermediate uptrend for the indices are at their earlier intermediate tops and are at 15,600.30 for the sensex and 4,693.20 for the nifty. These levels will be lowered after a minor rise is followed by a minor decline. The equivalent level for the CNX Mid Cap index is at 5,741.55.
In the last week we have seen that the rate of decline by the indices has been quite strong and the indices have dropped below the eleven days lows in just five days. This suggests that the momentum on the downside has been strong and unless we see an equally strong rise in the next intermediate rise, the recent intermediate tops will be difficult to cross. The recent intermediate tops are quite important and a close past these intermediate tops of 15,600.30 for the sensex and 4,693.20 for the nifty will confirm the continuation of the major uptrend and higher levels for the indices. Thus, the Budget is now quite important and some major reforms and announcements will result in the indices making new highs. On the other hand, if the current budget disappoints, than we could see a correction which could take the indices towards the next important support which is just before the election results.
In the current intermediate downtrend, the banking stocks along with the tech stocks have seen the least decline and most of these stocks have been exhibiting a bullish relative strength. If the indices were to close past the recent intermediate tops, than the stocks which are exhibiting a bullish relative strength will lead the rise and I will discuss some of the banking stocks today.
ICICI Bank went into a major uptrend like most of the stocks in the earlier intermediate uptrend and has witnessed a lower percentage decline in the last week as compared to the indices. The stock has been consolidating sideways between 655 and 780 and a close past 780 with a strong surge in trading volumes will result in the start of a fresh intermediate uptrend. This will also confirm the major uptrend and higher levels for the stock. The stock has a strong support at 675 and this must hold in the current intermediate downtrend, otherwise a drop below this level will result in the stock drifting lower. On the upper side, the stock will have to move past the resistance of 765 before it can move past 780. The weekly MACD histogram has made a new high in the last intermediate rise, suggesting that the stock will make a new high once it goes into a new intermediate rise.
Bank of India is another stock in the banking sector which has been staying sideways for the past few weeks. Most of the stocks in the banking sector have been exhibiting a similar formation in the past few weeks and a close past the earlier intermediate top with a strong surge in trading volumes will confirm higher levels for the stock. The earlier intermediate top is at 355 and a close past this level will mean higher levels towards the next important resistance of 388. Traders and investors can look for long positions once the stock breaks out from the current sideways mode.
PNB
PNB is in a major uptrend and the stock faced a resistance at its earlier major top of 721. The stock has been staying sideways on the weekly chart between 580 and 717 as the stock has taken a support at its 10 WMA. Once the stock goes into a fresh intermediate uptrend, investors and position traders can look for long positions as the stock will make a higher intermediate bottom and will soon move past the recent intermediate top and into the all time high territory. The weekly momentum indicators are bullish indicating higher levels in the next intermediate rise.
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