The intermediate trend of the indices remains down as the Sensex has paused at its earlier intermediate bottom of 14,677. If the Sensex were to go for an intermediate bottom at the current levels and only if the Sensex were to cross its earlier intermediate top of 17,736, the major trend of the Sensex will turn up. The Nifty has already dropped below its earlier intermediate bottom and is in a major downtrend as the index has been exhibiting descending intermediate tops and bottoms. The CNX Mid Cap index is still above its earlier intermediate bottom of 5,896 and an intermediate bottom at this stage will raise the possibility of a major uptrend if the index were to cross its earlier intermediate top of 7,192.40.
Few sectors are already in a strong major downtrend like the banking, capital goods, cement and realty. Stocks in these sectors are making descending intermediate tops and bottoms and scores of stocks have lost more than 50% in these sectors. The relative strength line has been very weak and we will see lower levels if the indices continue to drop further. Some defensive sectors have been exhibiting strength and these are the few places for investors to hide in the current major downtrend.
In the last week, the Sensex lost 2.46% and the Nifty ended 2.39% lower. Among the sectors, the BSE Healthcare index was the largest gainer ending 4.61% higher and was followed by the BSE Capital Goods index, which registered a small loss of 0.11%. On the weaker side, the BSE Realty sector was the largest loser ending 8.70% lower and was followed by the BSE IT sector, which lost 5.71%.
The targets for the Sensex and the Nifty to get back into an intermediate uptrend are far away and are at 15,971 and 4,746.30 respectively. The equivalent level for the CNX Mid Cap index is at 6,288.15. The indices are in a minor rise and the next minor decline will lower these targets.
Except the pharma and fertiliser stocks, most of the stocks are in an intermediate downtrend and the bullish percent index is in the oversold condition, suggesting that we could see an intermediate bottom soon. This will take a while and once the indices make a higher minor bottom in the next minor decline, an intermediate rally could be seen. The other sectors which are exhibiting a bullish relative strength are tech stocks and FMCG. Thus, investors must be away from the weak relative strength and any long positions must be taken in bullish relative strength stocks.
Traders must wait for the indices and the pivitols to form an intermediate bottom and look for long positions in strong relative strength stocks. The healthcare sector has been witnessing a bullish activity in the past few days and I will discuss some of the stocks in this sector today.
Aurobindo Pharma has been rising in the last week with a strong surge in trading volumes. The intermediate trend of the stock has turned up and the money flow indicator for the stock has turned positive, indicating that the bulls have become active in the stock. The stock will have to move past its earlier intermediate top of 360 in the current intermediate rise to confirm a major uptrend. The strong volumes suggest that this is likely to happen soon. As the stock has been rising in the past week, traders and investors must wait for a minor decline before picking up long positions in the stock. The weekly MACD indicator has turned up indicating that the momentum on the upside is strong.
Dr Reddy
Dr Reddy is exhibiting a bullish relative strength as investors have been shifting from weak relative strength stocks to defensives. The stock has been rising with a strong surge in trading again, indicating that the bulls are active in the stock as they are getting out of weak banking, realty, and capital goods sector and are getting into defensive stocks. Traders can also look for long positions in these stocks and use any minor decline to pick up long positions in the stock. The next strong resistance to the stock is at 760 where traders can look for profits. Once this resistance is crossed, the next resistance is at 840.
Biocon is in a major uptrend as the stock has been exhibiting ascending intermediate tops and bottoms. The stock is currently at its 30 WMA where it is likely to face some hurdles before it moves higher. The money flow indicator for the stock is bullish and higher levels are expected in the current intermediate rise. The weekly MACD Histogram is making rising tops indicating that the stock will soon test its earlier intermediate top of 551.50. Use any minor decline in the coming week to add to the long positions. Keep a stop at 440 for this position and raise the stop as the stock moves higher.
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