The improvement during the Diwali week was short-lived as the indices did not go into an intermediate uptrend even as a few stocks went into a fresh intermediate uptrend. This means that the intermediate downtrend, which has started on August 12 is still intact as the indices are poised to test their recent minor bottoms if the intermediate rally does not start soon. The target for the Sensex to move into an intermediate uptrend is at 10,571 and for the Nifty it is at 3,161.25. The equivalent level for the CNX Mid Cap index to get back into an intermediate uptrend is at 3,868. The earlier intermediate top for the Sensex and the Nifty is far away and is at 15,580 and 4,650. As these levels are quite far away, the next intermediate uptrend will be a rally within a major downtrend and only traders must participate in the rally. Investors must stay sideways for some more time. The equivalent level for the CNX Mid Cap index to get back into a major uptrend.
In the last week, all the indices ended in red after two weeks gains seen after Diwali. The Sensex lost 5.81% and the Nifty ended 5.47% lower. Among the sectors, the BSE Realty sector was the largest loser, ending 14.14% lower and was followed by the BSE Capital Goods sector, which lost 8.96%. Among the sectors, which registered a lower loss, were the BSE Health Care index, which lost 1.08% and was followed by the BSE FMCG sector, which ended 3.15% lower.
The Sensex has support at 9,620, which is the 50% retracement level of the minor rise during Diwali and 8,940, which is the 61.8% retracement level. The equivalent support levels for the Nifty are at 2,750 and 2,640. A drop below 8,940 by the Sensex and 2,640 by the Nifty could result in the indices testing their recent minor bottoms attained on the October 27. In the coming week we will watch if these levels can hold and an intermediate uptrend can start. On the upper side, the Sensex has a resistance between 10,571 and 10,946 and only after the Sensex is able to close past this resistance zone, it will head higher to the 12,500 level. The Nifty has a resistance zone between 3,161.25 and 3,241. Once this resistance zone is crossed, the Nifty will move to the next resistance zone of 3,790. Our markets are moving in line with most of the markets around the world and in the last week we have also witnessed choppy conditions. The volatility was high as we saw a vertical fall by the markets in October. Now, as the markets stabilise, we are likely to see a drop in volatility as high volatility begets low volatility. Some power stocks are looking interesting and I will discuss some of these stocks today.
NTPC is in an intermediate uptrend even as the indices are still to confirm an uptrend. The stock has been declining at a lower rate as compared to the Sensex and hence the relative strength line of the stock has been bullish. The weekly MACD Histogram for the stock has been making a bullish divergence suggesting that the rate of decline by the stock in October was lower than the earlier rate of declines. The stock has a support at the 145 level and a resistance at the 165 level on the daily chart. On the weekly chart, the resistance to the stock is at 165, indicating that this will be an important resistance level which the stock will have to cross before it attains higher levels.
TATA Power is also in a major downtrend as the stock has been exhibiting descending intermediate tops and bottoms. The stock has been in an intermediate uptrend after making a new low on October 27 and is currently drifting lower towards the support of 715. If this support holds, the stock is likely to head higher towards the next resistance level of 845. On the weekly chart, the stock has a resistance at 940. The earlier intermediate top for the stock is far away and is at 1,170 and this will not be crossed in the current intermediate rise. Thus the major trend will remain down and the current intermediate rise is a trading opportunity only.
Reliance Infra
Reliance Infra has been exhibiting descending intermediate tops and bottoms and is in a major downtrend as the stock has been staying below its falling 30 WMA. However, the weekly MACD Histogram for the stock has been exhibiting a bullish divergence, indicating that the rate of decline by the stock has been lower in the last intermediate downtrend than in the earlier intermediate downtrend. On the daily charts, the stock has support at 500 and a resistance at 620. Once this resistance is crossed, the stock will head towards the next resistance of 785.
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