The intermediate downtrend, which had started on July 24, is still intact as the indices continued to exhibit descending minor tops and bottoms. The minor rise on the last two days i.e. on Thursday and Friday, are just minor within the intermediate downtrend and once it is over, we will see the indices reach lower levels. The targets for the Sensex and the Nifty to go into a fresh intermediate uptrend are at 15,568 and 4,534 respectively. These targets will be lowered to the highs, the current minor rise makes. The equivalent level for the CNX MidCap index to go into a fresh intermediate uptrend is at 6,183 and this level will also be lowered after a minor decline in the coming week.
The earlier intermediate bottoms made by the indices are quite important. As long as the current intermediate downtrend ends above the earlier intermediate bottoms, the major uptrend is intact and the bull-run will continue. However, if the indices were to drop below the earlier intermediate bottom levels, the major trend will turn down. The earlier intermediate bottom for the Sensex and the Nifty are at 13,946 and 4,100 respectively.
The equivalent level for the CNX Mid Cap index is at 5,460. Our indices continue to follow global markets and with all the stock markets around the world in an intermediate downtrend, our markets continue to follow suit. There are a number of factors supporting the indices before they drop below the earlier intermediate bottom levels and as long as we do not see a deeper correction in the global markets, the major uptrend is safe. If global markets especially the US markets drop sharply, than the major uptrend would be threatened. With a big presence of FFI?s in our markets, we are highly connected to the other stock markets around the world.
In the past week, the Sensex ended 0.63% lower and the Nifty lost 0.98%. The BSE Consumer Durable index was the largest gainer ending 2.03% higher, followed by the BSE capital goods sector which gained 1.78%. On the weaker side, the CNX IT index was the largest loser ending at 3.53%, followed by the BSE auto sector which lost 2.97%. The Sensex has had a good support between the recent minor bottom of 14,896 and the earlier intermediate top of 14,683. As long as the current intermediate downtrend ends at this strong support zone, the major uptrend will remain intact and the bull-run will continue. We will keep a close watch at this zone in the current intermediate downtrend.
Investors must use the current intermediate decline to study which stocks are holding on and exhibiting a bullish relative strength and which strong relative strength stocks are pulling back towards their strong support factors. Once the indices hit rock bottom, these stocks will be the first to hit new highs. I will take a look at a few such stocks today.
Union Bank
Union Bank is in a major uptrend as the stock has broken out of a big sideways formation in the earlier intermediate rise. The breaking out of the large sideways formation has happened with a strong surge in trading volumes indicating that the bulls are in control of the stock. As the indices correct, Union Bank is pulling back towards its strong support range between 135 and 140. This is a strong support zone and investors can use this pull back towards this support zone to add to their long positions. Position traders can wait for the stock to make an intermediate bottom at this support before picking up long positions in the stock. The relative strength line for the stock is bullish indicating that the stock has been outperforming the indices.
United Phosperous
After reaching a nice bottom in the past few months, United Phosperous broke out of this basing formation and went into an intermediate uptrend with a strong surge in trading volumes. The weekly MACD for the stock has turned up indicating that the momentum for the stock is strong and higher levels by the stock will be seen soon. As the major trend of the stock is up and the intermediate trend up, any pull back towards the strong support between 317 and 322 can be used by investors to pick up long positions in the stock. The stock has a strong resistance between 351 and 352 and traders can book partial profits at this resistance level. A breakout above this resistance level will take the stock into an all time high territory.
Voltas is another stock which investors must keep a close watch on. The stock had broken out of the strong resistance and the earlier major top of 120.50 in the earlier intermediate uptrend. After attaining a high of 151.40, the stock has been in an intermediate downtrend like most of the stocks the relative strength line for the stock is bullish and with the MACD Histogram making new highs in the earlier intermediate uptrend, higher levels by the stock will be seen in the next intermediate uptrend. The stock may not pull back towards the support of 120, but once a higher intermediate bottom is formed above this support, investors can add to their long positions.
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