The Sensex is still within the rising channel indicating that the uptrend is still intact and a bigger corrective mode will start only after the indices drop below the rising channel which has been intact since last Diwali.
The large volatility at the 12,000 levels is not a bullish sign and suggests that a correction to the uptrend could soon be seen.
The Sensex and the Nifty dropped below their respective targets on Friday on an intra-day basis, but soon recovered and closed well above their targets. Thus, the Sensex and the Nifty will have to close below 11621 and 3433 to confirm a start of a fresh intermediate downtrend.
The lower end of the rising channel is at 11,375 and as long as the Sensex stays above this level all corrections are likely short term in nature.
In the last week we have again seen two days of distribution. The indices have been exhibiting large swings and if we see more days of distribution in the coming week, it will not be a bullish sign. Continue to keep a watch on the volume action along with the price in the coming week.
The earlier intermediate bottoms for the Sensex and the Nifty are at 9158 and 2783. The next intermediate decline will have to take these indices below these levels for the bull-run to end. As these levels are far away this is not likely to happen soon.
The Sensex and the Nifty ended lower in the last week while the CNX Mid Cap index and the BSE small cap index outperformed the large caps indices for the time after about six months.
If this trend is to continue it will mean that the activity is shifting into the mid-cap and the small cap stocks and investors and traders will have to look to these stocks.
Among the sectors, the oils and gas sector was the best performer gaining 1.83% in the last week and was followed by the FMCG sector which gained 1.61%. The worst performer was the IT sector which ended 4.57% lower. I would like to see the activity in the mid-cap and small cap building before we again start looking at these stocks.
Another sector which has seen a rise in the activity in the last week is the bearings sector. Some stocks in this sector have seen a good build up in volume and some of these stocks look interesting. I will discuss some of these stocks from this sector today.
SKF Bearings has been in a major uptrend since mid-2003 as the stock has been exhibiting ascending intermediate tops and bottoms and has been staying above its rising 30 WMA. After remaining sideways for a couple of months, the stock has broken out of the sideways formation with a strong surge in trading volume indicating that the intermediate trend of the stock has again turned up and the stock is headed higher in the next few weeks.
Investors must hold on to the long positions with a stop at 292 and position traders can look for small long positions in the stock on a pull back towards the support of 332. The relative strength line that was moving sideways for the past few months has again started to improve.
Austin Engg is also in a major uptrend since mid-2004 and has broken out of the sideways formation on Friday with a strong surge in trading volumes.
The breakout from the sideways formation suggests that the stock is heading higher and positions traders can add to the long positions with a stop at 82.
Investors must keep a stop at 77 for the long positions held in the stock. Traders must raise the stop as the stock moves higher. The breakout with a strong surge in trading volumes suggests that the bulls are active in the stock and the money flow is positive.
Fag Bearings has been in a major uptrend since mid 2004 and the stock has been moving higher and exhibiting rising intermediate tops and bottoms.
Currently, the stock is already in an intermediate uptrend and traders must keep a stop of 600 for the long positions held. The stop for the investors is currently at 421 and this will be raised after the next intermediate correction.
The relative strength line for the stock is the strongest and is making new highs indicating that the stock has been outperforming the indices.
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