The intermediate uptrend triggered by the Sensex and the Nifty in the last week fizzled out as these indices have dropped below their earlier minor bottoms indicating that the intermediate downtrend which had started on January 10 is still intact and the Sensex will have to move past 18,896 and the Nifty past 5,545 to reinstate the intermediate uptrend. The CNX Mid Cap index continues to remain in an intermediate downtrend and will have to move past 7,631.40 for the intermediate trend to turn up.
The global weakness in the stock market has sent shivers down the spines of the bulls in the last one month as most of the bulls have lost a packet. The bears are not having a good time either as even though the indices have been moving lower, the volatility has been quite high resulting in the stops being hit.
The Sensex and the Nifty have dropped below their earlier intermediate bottom, indicating that the major trend of the indices is down. Usually, a major downtrend lasts for six months or more, indicating that investors must stay away from the market for some time, as in bear markets traders have to trade in the direction of the intermediate trend. The Sensex will have to move past its earlier intermediate top of 21,207 in the next intermediate uptrend to reinstate the major uptrend. The equivalent level for the Nifty is at 6,357.
The BSE Consumer Durables again led the decline in the last week as the index lost 7.13% and was followed by the BSE Bankex which lost 6.96%. The Sensex ended 4.21% lower and the Nifty lost 3.70%. All the sectors ended in the red as the BSE Healthcare sector registered the lowest loss ending 0.22% lower and was followed by the BSE Realty sector which lost 0.84%. Most of the frontline stocks have dropped below their earlier intermediate bottoms and whenever a rally in the indices starts, we are likely to see a rally in the frontline stocks first. Mid-cap and Small-cap stocks will languish.
Today, I will take a look at the cement sector. Most of the frontline stocks in this sector are in a major downtrend and have not participated in the market for a while. However, a few are exhibiting a short-term relative strength and if the indices start a fresh intermediate rise, position traders can look at a few stocks in this sector.
ACC made a major top in October 2007 and since then the stock has been exhibiting a descending intermediate top and bottom. The stock is trading well below its 30 WMA and the next intermediate rise will be a rally within the major downtrend. The weekly MACD histogram for the stock has made descending bottoms, indicating that the stock will follow suit in the next intermediate decline or retest the recent intermediate bottoms before making a bottom. The short-term relative strength line for the stock has turned bullish and position traders must look for long positions once the stock goes into a fresh intermediate uptrend. A move past 803 will take the stock in a fresh intermediate uptrend. Wait for the stock to go into a fresh intermediate uptrend before picking long positions.
Ultratech Cement
Ultratech Cement has also made a major top in October 2007 and since that time the stock has been trading below its falling 30 WMA and exhibiting descending intermediate tops and bottoms. The relative strength line remains weak as the line has been exhibiting lower bottoms and tops. This means that since October the stock has been underperforming the indices. The weekly momentum indicator for the stock is weak, exhibiting lower bottoms in the next decline, and hence any intermediate rise will be a rally within the major downtrend. Thus, the next intermediate rise will be a rally within the major downtrend and just a trading opportunity for traders. Investors must continue to stay away and must look for longs only when we start seeing new bottoms, which will take a while.
India Cement
Most of the cement stocks are in a major downtrend and India Cement is no exception. Like the other stocks discussed today, the stock has been staying below its 30 WMA and the recent decline in January was quite strong, resulting in a strong momentum on the downside. This suggests that the next intermediate decline will result in the stock making new lows or at least test the recent bottoms. The short-term relative strength has improved, indicating that the stock is not declining at the same pace like the indices. However, position traders must wait for the stock to get back into a fresh intermediate uptrend before getting into the stock. Investors must stay away for some more time and wait for a new base to be formed.
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