The indices improved in the last week as the Sensex held the support at 15,300 and the Nifty at 4,600. The CNX Mid Cap index has reinstated the intermediate uptrend after moving past its earlier minor top and it is quite likely that the Sensex and the Nifty could follow suit. We are also seeing more and more stocks going into a fresh intermediate uptrend in the past few weeks and the bullish percent index has been improving.

The Sensex will have to move past 16,237 and the Nifty past 4,917 to suggest that the intermediate trend is still up. Even though these indices confirm an intermediate uptrend, the rate of rise has been extremely slow and is indicating that the rise is a rally within the major downtrend. The trading volumes have been quite thin and are well below their 50 days average, which also suggests that this is a corrective mode within the bear market. The daily MACD indicator for the indices and majority of the stocks have been staying above its trigger line, indicating that the momentum is on the upper side and we are seeing more stocks go into a fresh intermediate uptrend. However, as this indicator has given a buy signal well below its zero line, the rise is a corrective one. The earlier intermediate tops for the Sensex and the Nifty are at 18,895 and 5,545 respectively, and only if these indices are able to move past these levels in the next intermediate rise, the major downtrend remains intact. The indices are also staying well below their 200 DMA and this long-term moving average will act as a strong resistance to the rally.

In the last week, the Sensex gained 3.03% and the Nifty ended 2.81% higher. Among the sectors, the BSE Oil & Gas index was the largest gainer ending 7.26% and was followed by the BSE Power sector, which gained 6.76%. On the weaker side, the BSE Reality index lost 2.06% and was followed by the BSE IT sector, which lost 0.76%.

The coming week is a truncated week as we have just three trading days. Moreover, the results will start pouring in and we are likely to see a rise in activity giving traders a good opportunity. The major trend of the indices is down as the indices are exhibiting descending intermediate tops and bottoms. Hence, investors must stay away from the rally and must wait for some more time till the stocks and the indices make new bases.

The oil and gas sector has seen some rise in activity, as some of the stocks in these sectors have been outperforming the indices. Also, the trading volumes in these stocks have improved and there is likely to be some more steam in these stocks for traders. Investors must, however, wait for a higher intermediate bottom in the next intermediate correction before picking long positions in these stocks. I will discuss some of these stocks today.

Hind Oil Exp

Hind Oil Exp was one of few stocks, which have started a fresh intermediate uptrend in mid-March and have been exhibiting ascending minor tops and bottoms with a strong rise in the trading volume. The strong trading volumes have resulted in an improvement in the money flow and the MACD histogram has been exhibiting rising tops, indicating that the momentum in the stock has been improving. The stock has retraced 50% of the decline since January and is headed towards the next resistance of 148-150. Traders can look for long positions in a minor decline, while investors must wait for the stock to make a higher intermediate bottom in the next intermediate correction before taking up fresh long positions.

RPL

RPL is another stock in the Oil & Gas sector, which has been falling at a lower rate in the last month and has now broken out of the strong resistance from the descending trendline. The trading volumes in the past two trading sessions have improved, indicating that the bullish activity is back in the stock. The stock is now at the strong resistance at 183.25 levels, which is also the 38.2% retracement level of the strong decline in January. We could see some consolidation here, before the stock moves higher towards the next resistance of 202, which is the 50% retracement level. This will give good opportunity for traders on the long side. Investors must wait for a higher intermediate bottom in the next intermediate correction.

Cairn Ind

Cairn Ind is one of the few stocks, which have made it very close to its earlier intermediate top of 256 and a close past this level will mean that the major trend of the stock is up. The relative strength line for the stock is already bullish, indicating that the stock was declining at a lower rate in the past few weeks and now, it has been rising at a higher rate. The trading volume has been strong, resulting in a strong money flow, and is the right stock for investors in the next intermediate correction.

?For more details contact mayur_s@vsnl.com