The indices gained for the fifth successive week as they closed past their weekly resistance levels and are headed towards their 200 DMA. The Sensex has a 200 DMA at the 11,340 level and the Nifty has it at 3,435. The 200 DMA is a long term moving average and acts as a support in a bull market and will act as a resistance in a bear market. The 200 DMA for the CNX Mid Cap index is at 4,290 and is still quite far away indicating that the mid-cap stocks were lagging in the current intermediate rise and are currently playing catch up.
The Sensex gained on all the days or the last week and added 4.40% to its kitty and the Nifty ended with a weekly gain of 4.08%. Among the sectors, the BSE Reality sector was the largest gainer ending 13.69% and was followed by the BSE Consumer Durables index which gained 13.59%. All the sectors ended in green in the last week and the least gainers were the BSE FMCG sector which ended 1.18% and was followed by the BSE IT sector which gained 1.82%.
In the last week, the indices gapped higher and the gap between 9,922 and 10,107 will act as a support to any minor decline in the coming week. The Nifty does not exhibit any gap while the Nifty future has a gap between 3,072 and 3,146 which will act as a support.
The targets for the Sensex and the Nifty to drop into an intermediate downtrend are at 9,520 and 2,962 respectively. A minor decline followed by a minor rise will raise these targets. The equivalent target for the CNX Mid-cap index to drop into an intermediate downtrend is at 3,248.
The weekly support to the sensex is at 9,400 and 2,885 for the nifty. As long as this support holds in the next intermediate correction, the major uptrend is likely to continue. Many stocks have closed past their earlier intermediate tops suggesting that the major trend of the indices is up. The sensex has come closer to its October highs of 10,945 and a close past this level will result in the sensex confirming a major uptrend. The nifty has already closed above the October highs of 3,240.
With the intermediate uptrend already six weeks old and the indices moving closer to their first targets of their 200 DMA, traders must look for profits taking in the coming week. Many stocks have also reached their weekly resistance levels and could start reacting and drop into an intermediate correction. As we move into the result season and also once the election starts, we are likely to see some uncertainty which cold trigger an intermediate downtrend which could correct about 50% to 61.8% of the current intermediate uptrend. Many stocks have made nice basing formations and will be headed higher even after the next intermediate correction. I will look at some of these stocks today.
Bharat Forge has made a nice rounding base since October suggesting that the stock may have bottomed out in the last decline. Usually, rounding bottoms are nice base building patterns but as this pattern has formed well below its 30 WMA, it suggest that the stock will take some more time before we could see the stock zooming. This long term moving average will act as a resistance to the current intermediate rise and once this level is crossed, the stock could be heading to the next resistance which is 200. Investors must wait for the next intermediate correction during the elections to get into such stocks. A few fertilizers stocks have made a nice basing formation and GNFC is one of them. The stock has closed past its October highs and is in a major uptrend and is headed higher in the current rally. As the major trend of the stock is up, traders and investors can look for long positions in the next intermediate correction to get into the stock. The weekly support to the stock is at 56 and a pull back in the next intermediate correction to this level will provide a nice opportunity to the investors and position traders. Higher levels above 100 are expected in the next intermediate rise.
Century Textiles. is also making a nice basing formation and is close to its October highs of 229. A close past this level will confirm a major uptrend for the stock. Again, like the other stocks which I have discussed today, Century text. is trading well below its 30 WMA and this long term moving average will act as a resistance to the uptrend. The 200 DMA for the stock is at 298 and this moving average has been declining. Usually in a rally, stocks also pull back towards their 200 DMA and this is another stock which a position trader and an investor must look after an intermediate correction.
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