After witnessing three consecutive up weeks, the indices declined on all the days in the last week as the CNX Mid Cap index is in a confirmed intermediate downtrend, while the targets for the Sensex and the Nifty will have to drop below 16,589 and 4,991 to confirm an intermediate downtrend. The intermediate uptrend had started on the March 18 and with scores of stocks dropping into an intermediate downtrend in the last week, the intermediate correction has started.
The indices are in a major downtrend and with the Sensex and the Nifty not being able to move past their earlier intermediate top of 18,496 and 5,545, the bear market remains intact. The only possibility of a start of a bull run would be that the current intermediate downtrend ends above the earlier intermediate bottom for the Sensex and the Nifty. The values for these bottoms are at 14,677 and 4,468 respectively. The earlier intermediate bottom for the CNX Mid Cap index is at 5,666.
All the indices ended in the red as the Sensex lost 4.90% and the Nifty ended 4.70% lower. Among the sectors, the BSE Reality sectors took the largest beating as it declined by 9.49% and was followed by the BSE Capital Goods sector, which lost 7.97%. Among the least losers, the BSE FMCG index lost 0.64% and was followed by the BSE Metals index, which lost 1.59%.
The market breadth was weak on all the days in the last week as many stocks dropped into a fresh intermediate downtrend. Till Friday, we could see many stocks and sectors not yet participating in the current intermediate downtrend and if these stocks join the decline, the indices will drop below their earlier intermediate bottoms. On the other hand, if we see not all stocks joining in the current intermediate downtrend or few stocks declining at a much lower rate as compared to the Sensex, than the possibility of the indices making a higher intermediate bottom in the current intermediate downtrend are higher. This will be known in the next week or two.
The indices have been falling on all the five trading days in the last week and traders must use a minor rise to look for short positions. The Sensex has support at the gap between 16,570 and 16,589 and once this gap is taken out, the intermediate downtrend for the Sensex will be confirmed. The next support to the Sensex is at 16,450. The Nifty does not show any gap as the NSE does not keep open gaps and the Nifty has support at 4,970, which is the low of Friday. The next support is at 4,900. The cement sector is the weakest sector, as these stocks did not participate in the last intermediate rally. Traders can use the minor rise in the next few days to take up short positions in these stocks.
Ultratech Cement
Ultratech Cement is in a major downtrend as the stock has been exhibiting descending intermediate tops and bottoms and has been staying below its 30 WMA. The stock has already dropped below its earlier intermediate bottom, while the indices are still quite far away from their earlier intermediate bottoms. This means that the stock is weaker than the indices and the relative strength line is making new lows. A minor rise in the coming week must be used by traders to look for short positions in the stock. The stock has support at 662, 599, and 500. Investors must avoid weak relative strength stocks. Wait for the indices to bottom out and we will start picking up long positions in strong relative strength stocks.
ACC is also one of the stocks in the cement sector, which has been exhibiting a weak relative strength and is in a major downtrend. The stock did not participate in the earlier intermediate rise and remained in an intermediate downtrend even as the indices were in an intermediate uptrend. The stock is currently at the support of 710 and a drop below this level will result in the stock testing the January lows of 615. The weekly MACD Histogram for the stock had made lower bottoms in the last intermediate downtrend indicating that the stock will follow suit and make new lows in the current intermediate rise. Traders must wait for a minor rise before taking fresh short positions.
Ambuja Cement
Ambuja Cement is staying below its 30 WMA and was an underperformer since the time the government had taken steps to curb selling prices of cement. The major trend of the stock is down and the stock is currently at the earlier intermediate bottom of 109. The intermediate trend is down and the relative strength weak and this makes for the right recipe for shorting the stock. Wait for a minor rise before taking short positions in the stock. The supports for the stock are at 109, 107 and 100. Investors must stay away from the stock.
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