Cement Sector Stocks: A Show Of Strength

Updated: Nov 9 2003, 05:30am hrs
The intermediate uptrend, which had started last week, witnessed the first minor correction as most of the frontline pivotals paused and declined to end the week on a weak note. The major trend of the indices is, however, up and as long as the indices stay above their earlier intermediate bottoms, the major trend of the indices will be up. The earlier intermediate bottoms for the Sensex and the Nifty are at 4600 and 1434.75 respectively and as long as the indices stay above these levels, the major trend of the market will be up and the bull run intact.

Though the decline seen on Friday was widespread, there were not many stocks, which went into a fresh intermediate downtrend. The activity in the past few days has spread to some midcap stocks, but this was not widespread. Among the sectors, which were strong in the last week, were the cement, power and select PSU stocks.

A few more sectors like the media and entertainment may see a rise in the activity in the coming week and once the minor correction by the indices is over, we are likely to see activity back in the cement and the power sectors. Investors may have picked up long positions in some of these stocks and traders can use the minor correction in these sectors to add to the long positions they may be holding. I will discuss the cement sector today.

Grasim Ind

Grasim is the strongest stock in the cement sector and was one of the first stocks in the cement sector to bottom out and go into a major uptrend.

The stock was recommended by me when it was breaking out of the two-and-a-half year base and now, since that time, there has been no stopping to the strong run seen by the stock. The relative strength line has been staying above its zero line and moving higher indicating that the stock has been outperforming the indices.

Stay invested in the stock and traders can use a minor decline in the past three days to add to their long positions as the decline was with lower volumes with the daily and the weekly momentum indicators favouring the rise, higher levels by the stock will be seen soon.

Use 691 as the stop for the long positions held and continue to raise the stop as the stock moves higher. There are no signs of the intermediate strong trend terminating soon as there is no selling by strong volumes.

ACC

ACC has been lagging behind the other stocks in the cement sector, and is now doing some catch-up work in the current intermediate rise. The stock broke out of the strong resistance of 220 in the last week and is now headed higher. The daily and the weekly momentum indicators for the stock are up and any pullback in the current minor decline towards the support of 220 must be used by traders and investors to add to their long positions.

The relative strength line for the stock is moving higher, but is still below the zero line indicating that the stock is performing like the indices and will outperform the Sensex once the relative strength line moves above its zero line. The relative strength line will move above its zero line only if the stock witnesses a higher momentum after the current minor correction. Investors can stay invested with a stop below the strong support of 220. The weekly MACD histogram is up confirming that the intermediate trend is up and the stock soon move higher.

Gujarat Ambuja

Gujarat Ambuja did a smart catch-up in the current intermediate uptrend as the stock has outperformed all the stocks in this sector in the current intermediate rise. This has resulted in the stocks relative strength line immediately crossing the zero line and is now moving higher. The stock broke out of the strong resistance of 245 and touched a high of 295 in the last week.

The minor decline seen by the indices has resulted in the stock pausing for some time before moving higher. Both the short-term momentum and the intermediate momentum indicators for the stock are in the bullish mode indicating higher levels by the stock soon. The next resistance levels for the stock are at 325 and 360 where traders can look for profits in the current intermediate rise. Traders can also use the minor decline in this stock and ACC to buy call options on the stock.

(For more details, contact mayur_s@vsnl.com)