This was bound to happen after a strong rise we saw in November and early December. The pause or the sideways correction is a breather by the indices and the stocks before they launch into a strong upward move soon. If the correction is not strong as we are currently seeing in most of the stock, the next upward move will be quite strong.
The target for the Sensex to go into a fresh intermediate downtrend is at 3301.80 and the target for the nifty to go into a fresh intermediate downtrend is 1069. A fall below these levels will confirm the correction mode.
However, if the indices are able to stay above these levels and trade sideways for the next few days, it is also possible that they could breakout for the sideways mode and start moving higher. This is because a few sectors are already in an intermediate downtrend since the past two weeks or more. Though trading in the current sideways mode will not be quite profitable, traders and investors must keep a close watch at the market and must get in immediately once the current correction is over.
Today I will take a look at a few pivotal which are already correcting and should be picked up once the correction is over. Investors can pick up these stocks in the correction. Those stocks which exhibit the least decline in the current correction mode will be the best picks.
Reliance Industries is in an intermediate downtrend since the stock attained an intermediate top of 304.35. The major trend of the stock is up and the stock has seen a strong run up in the earlier intermediate uptrend. Since the past two weeks, the stock is moving sideways and frustrating traders.
Investors must hold on to the stock and add to the long positions in the current correction.
Either buy when the stock pulls back towards its 30 WMA or buy when the stocks completes the current correction and starts a fresh intermediate uptrend. The relative strength line for the stock is above its zero line, but is moving down as the stock is in an intermediate uptrend. However, till such time the stock is in a major uptrend, the correction is an opportunity to get into the stocks.
Mahindra & Mahindra
Like most of the automobile stocks, Mahindra & Mahindra is moving sideways since the past two weeks and going no where in this period.
This sideways consolidation is a bullish correction after the smart rise the stock saw in November.
The stock is near to its 30 WMA and any pull back towards this long term moving average must be used by investors to get into the stock or add to the current positions held.
There are more stocks in the two wheeler sector which are also poised to move up smartly in the next rise and investors should be in this sector especially in the strong stocks.
After looking at a few old economy stocks, we are back to the leader in the new economy stocks. Naturally, this stock is Infosys and the stock is also in a corrective mode and not trendline sharply at the moment.
This is the corrective mode which we were looking for and though many stocks and the indices are still not in an intermediate downtrend, an intermediate sideways correction is also an correction and the sideways mode means that the market is quite strong and at every strong decline we are witnessing a strong buying activity which refrains the indices from moving lower. Infosys lead the earlier intermediate rise and will not remain behind in the next intermediate uptrend.
Investors can use any pull back towards the Rs 4,400/4,450 level to get into the stock. Traders must wait for the stock to complete the current correction and get into the stock in the next intermediate uptrend.