The intermediate uptrend was reinstated as the Sensex and the Nifty moved past their earlier minor tops of 16,452 and 4,970, and this means that the intermediate trend is up, since these indices formed an intermediate bottom on March 18. The major trend of the indices and most of the stocks is down and the Sensex and the Nifty will now face more hurdles at 16,683 and 5,019. The next important hurdle is from their 200 DMA, which are at 16,954 and 5,031 respectively. In a bear market, the 200 DMA will act as a resistance and must be used by traders to look for profits in the rally.
The current intermediate rise is a rally within the major downtrend, as the trading volumes have been staying below their 50 DMA on almost all the days in this period of the intermediate uptrend. Also, few stocks have been able to close past their earlier intermediate tops and suggest that the intermediate uptrend is a rally within a major downtrend and traders can look for profits at or below the resistance suggested above.
The earlier intermediate top for the Sensex and the Nifty are at 18,895 and 5,545, and these indices will have to close past these levels in the current intermediate rise to confirm that the major trend is up. The equivalent level for the CNX Mid Cap is at 7,813.
The last week had just three trading days, but all these days belonged to the bulls as the indices improved on all the days. The Sensex gained 4.26% in this period and the Nifty ended 3.78% higher. Among the sectors, the BSE IT sector was the largest gainer, ending 13.43% higher and was followed by the BSE Realty sector, which gained 6.16%. On the weaker side, the BSE Capital Goods sector was the weakest, as it ended with a small gain of 0.94% and was followed by the BSE Auto sector, which gained 1.87%.
With the major trend of the indices and most of the stocks down, it is important for investors to stay away and wait for the indices to make a nice base above the strong support for the Sensex at 14,500 and Nifty at 4,400.
If these levels are held than only investors will have to start looking to buy into strong relative strength stocks. The money flow indicator is not exhibiting any change in the major trend and is staying below the zero line, indicating that the indices will soon retest the recent intermediate bottoms attained on March 18.
Realty stocks remain weak and once the current intermediate rally ends, these stocks will again take a lead on the downside, as they have been the worst performers in the current intermediate uptrend. Investors must avoid picking long positions in these sectors as of now and position traders can keep a close watch on these stocks and look for shorts once these stocks again start an intermediate downtrend. Today, I will discuss some of these stocks, which will soon provide traders with an opportunity.
Unitech has been exhibiting descending intermediate tops and bottoms and has been staying below its 30 WMA, indicating that the major trend is down. The stock has been a huge underperformer in the current intermediate rally and is likely to lead the downside once the current intermediate uptrend ends. The stock has a support between 256 and 260 and a close below this support will mean lower levels for the stock and a good opportunity of the downside.
Once this support is broken, the stock will head to the next important support of 210. The relative strength line for the stock is weak and the weekly MACD Histogram is making lower bottoms, indicating lower levels for the stock in the next intermediate downtrend.
Patel Engg
Patel Engg is also an underperformer in the current intermediate rally and has been staying close to its earlier intermediate bottom. The major trend of the stock is down, as the stock has been staying below its 30 WMA and has been exhibiting descending intermediate tops and bottoms. A drop below 531 will result in lower levels for the stock and traders can look for short positions once the stock drops below this level.
The supports to the stock exist at 485 and 400, where traders can look to book profits. The relative strength line has made descending tops and bottoms, indicating that the stock is underperforming the indices.
Ansal Properties
Ansal Properties is another stock in the realty sector, which is exhibiting weak relative strength and has been staying below its 30 WMA.
The indices are in an intermediate uptrend, but Ansal Properties has been staying sideways. A drop below 137 will mean that the intermediate trend is down and once the first support of 132 is taken out, the stock is headed towards the lower support at 80. Look for short positions once the stock goes into an intermediate downtrend.
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