Bulls all gassed up

Updated: Nov 13 2005, 05:30am hrs
Since Diwali the bulls are back into action as they have forced the bears to cover their shorts and have recovered more than 70% of the losses that occurred in the earlier intermediate downtrend. The intermediate uptrend is already two weeks old and the frontline or the large cap stocks have registered higher gains than the mid cap and the small cap stocks. The frontline stocks have been buzzing since Diwali while few select mid cap stocks have been moving indicating clearly a shift in the activity in the large cap stocks.

The major trend of the Sensex and the Nifty is still up as they bottomed out before dropping below the earlier intermediate bottom. The new intermediate bottoms attained on the October 28 with a Sensex low of 7656 and the Nifty low of 2307 are now the higher levels and the new targets for the major downtrend. We had seen scores of stocks especially in the mid cap and the small cap segment had dropped into a major downtrend in the earlier intermediate decline. If the indices now make a lower intermediate top and than drop below these new levels, then the major trend will be defined as down. On the other hand, if the indices are able to close past the earlier intermediate tops of 8821 and 2669 made by the Sensex and the Nifty respectively, then the bull run will be considered intact.

The intermediate uptrend is already two weeks old and the targets for the Sensex and the Nifty to go into a fresh intermediate downtrend are at 8265 and 2475 respectively. As long as the correction by these indices stays above these levels, the intermediate trend of the indices will remain up. The next important resistance levels for the current intermediate uptrend are at 8600 and 2600 for the Sensex and Nifty respectively.

Among the sectors, we are seeing a very strong activity in the oil and gas stocks. These stocks were lagging behind in the bull-run due to the rise in the oil prices; but now, with the oil prices coming down, the activity in these stocks has been bullish. Few investors were holding long positions in these stocks a few weeks back, and it was very easy for the bulls to take up positions in these stocks once the oil prices started dropping. I will take a look at these stocks which are currently buzzing around.

IOC

IOC has recently gone into a major uptrend after the stocks closed past its earlier intermediate top of 478 in the current intermediate rise. The stock has been seeing a strong surge in the trading volumes indicating that the bulls are quite active and soon the stock will exhibit higher levels. The relative strength line of all the oil stocks was lagging behind and with these stocks going into a strong intermediate uptrend, the relative strength line has also improved and turned bullish. The weekly MACD for the stock is already above its trigger line and has started moving higher indicating a strong momentum. The next resistance levels for the stock are at 520, 546 and 580. Stay long and use any minor decline in the coming week to add to the long positions in the stock.

Bharat Petro

Bharat Petro is another stock in the refinery sector which has recently gone into a fresh major uptrend. Like the other stocks in this sector, the stock was lagging behind and was till now in a major downtrend. The stocks has closed past its earlier intermediate top of 428.85 and is now in a major uptrend. The trading volumes have been zooming indicating that the bulls are back in this sector. The relative strength line which was lagging behind has started to bottom out and is now moving higher indicating that the stock has for the time outperformed in the indices. The next resistance level to the stock is at 459, 475 and a bigger resistance zone between 520 and 530. The weekly momentum indicators are bullish indicating higher levels in the current intermediate uptrend.

Hindustan Petro

Hindustan Petro has also seen a rise in the activity in the last week as the stock has exhibited ascending intermediate bottoms and will have to move past its earlier intermediate top of 338 in the current intermediate uptrend to confirm that the major trend of the stock has turned up. Like the other stocks discussed today, the relative strength line for the stock is improving and will turn bullish as soon as the major trend of the stock turns up. The trading volume has been on the rise indicating the strong bullish activity in these stocks. The weekly MACD indicator is bullish and is above its trigger line and moving higher indicating the rise in the momentum. The next resistance levels for the stock are at 345, 380 and 416 respectively.

The author may be contacted at mayur-s@vsnl.com