A highly volatile week as the Sensex took support at 12,800, just above the important level of 12,670 and the Nifty took support at the 3,850 level. A majority of the indices ended in the red as the Sensex lost 2.52% and the Nifty ended 2.92% lower. Among the sectors, the capital goods sector bounced back smartly as it ended 2.34% higher and was followed by the BSE IT sector, which gained 1.59%. On the weaker side, the BSE Metals index ended 9.44% lower and was followed by the BSE Auto sector, which lost 6.98%.
The high volatility at these levels for the indices suggests that the bulls have become active and have started looking for bargains at these levels, while the bears are looking to book profits. The intermediate trend of the indices is still down and the targets for the Sensex and the Nifty to get back into a fresh intermediate uptrend is at 14,450 and 4,325 respectively. These levels are far away and a minor rise followed by a minor decline will lower these targets. The equivalent target for the CNX Mid Cap index is at 5,698.
The major trend of the indices is down and the bear market has been intact since January. A majority of the stock markets around the world are in a major downtrend as they are also exhibiting descending intermediate tops and bottoms. The earlier intermediate top for the Sensex and the Nifty is at 17,735.70 and 5,298.85 respectively. These levels will have to be crossed in the next intermediate rise for the indices to get back into a major uptrend. As these levels are far away, there is less possibility of the indices going into a major uptrend in the next intermediate uptrend. Hence, the next intermediate rise will be a rally within the bear market. The equivalent level for the CNX Mid Cap index to get back into a major uptrend is at 7,192.40.
The current intermediate downtrend has been intact since May 5 and is quite mature. The bullish percent index is near the zero level and is quite oversold, suggesting that a rally is likely to be seen soon. As the targets for the intermediate uptrend are also far away, the indices are likely to first exhibit a minor rise and will be followed by a minor decline in the coming week and this suggest that the volatility is likely to continue in the coming week. Once we have a lower intermediate uptrend target, than traders can look for long positions for the next intermediate rally. Investors must continue to stay away or trade in the rally. For a trader looking for short positions, it is a little risky at these levels. Wait for the next rally to end before taking fresh short positions.
A few stocks from the capital goods sector have gone into a fresh intermediate uptrend and today I will take a look at some of these stocks.
All the stocks are in a major downtrend and the current intermediate rise in these stocks is just a trading opportunity. Investors must stay away or trades these stocks on the long side like position traders.
BHEL
BHEL was a leader in the earlier bull run, but with the indices topping out in January, most of the stocks, which were leaders on the upside have now become leaders on the downside. BHEL is one such stock The stock took a support at the 1,325 level, which is a strong support zone for the stock and has gone into a fresh intermediate uptrend. The earlier intermediate top is at 2,366 and the stock will not move above these levels in the current uptrend. The stock has resistance at 1,808, 1,990, and 2,210, where traders can look for profits in their long positions. When the stock trades well below its 30 WMA, this long-term moving average will act as a resistance to the stock. Investors must continue to stay away.
Crompton Greaves
All the stocks in the capital goods sector are in a major downtrend and Crompton Greaves is no exception. The stock is trading well below its 30 WMA and has exhibited descending intermediate tops and bottoms.
The intermediate trend of the stock turned up on Friday and any minor decline in the coming week towards the support of 225 is a trading opportunity for position traders. The stock has a strong resistance between 270 and 280, where traders can look for profits in the long positions.
Above this level, the stock has a resistance at 343 and 383. Only trading positions in the stock are recommended.
Siemens has been beaten down quite a bit after the stock topped out in November. The stock topped out earlier than the indices and since November, it has been correcting and is exhibiting descending intermediate tops and bottoms. The relative strength line for the stock is weak as the stock has been underperforming the indices and investors must stay away from the stock. The intermediate trend of the stock has turned up and like other stocks in this sector, a rally has started in this stock. At higher levels, resistance to the stock is at 555 and 627 and traders must look for profits at these resistance levels.
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