The indices stayed sideways throughout the week, as the Sensex has been trading between 8,316 and 9,341 for the past 13 days. The Nifty has been staying between 2,502 and 2,833 in this period and this suggests that currently we are in a trendless market with very few stocks trending. A move out of this range will result in a trend and will give traders an opportunity to trade on the side of the breakout. As long as the indices stay in this sideways mode, day trading should be preferred.
In the last week, the Sensex lost 1.40% and the Nifty ended 1.48% lower. Among the sectors, the BSE Realty sector zoomed in the last week ahead of the package, which the government is going to announce during the weekend. It gained 8.40% and was followed by the BSE Metals index, which gained 5.85%. On the weaker side, the BSE IT sector was the largest loser, ending 7.88% lower and was followed by the BSE Consumer Durable index, which lost 7.52%.
The major trend of the indices has been down since January 2008 and has been exhibiting descending intermediate tops and bottoms. The earlier intermediate top for the Sensex is at 15,580 and for the Nifty it is at 4,650 and these were attained in August. Since this time, we have been seeing an intermediate downtrend. After attaining a low in October, the indices have been staying sideways with small minor uptrends. The intermediate trend remains down as the indices are not able to close past their earlier minor tops. This means that the correction after the sharp decline in September and October is now followed by a sideways correction.
As the intermediate top of the indices are far away, any confirmation of an intermediate uptrend will be a rally within a bear market and investors must stay sideways till we see some clear signs of bottoming. All opportunities till that time are for traders only. As the indices are trading in a range, only trading is advised and once the indices confirm a start of a trend, swing traders and position traders can look for positions.
On Friday, December 05, 2008, the Sensex did cross it target of 2,833, but for a few seconds, as traders looked to book profits and made a high of 9,340.69. Now, in the coming week, the Sensex will have to close past 9,340.70 to confirm that the intermediate trend is up. The target for Nifty to get back into a fresh intermediate uptrend is at 2,833. The CNX Mid Cap index has already gone into a fresh intermediate uptrend on Thursday and will have to close below 3,169.70 to drop back into an intermediate downtrend.
In the last week we saw traders building up long positions in realty and a few financial stocks ahead of the announcement by the government on Saturday. Few financial stocks look interesting and I will discuss some of these stocks today.
LIC Housing Finance is in a major downtrend as the stock has been exhibiting descending intermediate tops and bottoms. The stock went into a fresh intermediate uptrend in the last week with a strong surge in trading volumes resulting in a strong improvement in the money flow indicator. The stock met with a resistance at the 224 resistance zone and a close past the recent high of 227.25 will result in higher levels and a test of the next resistance level of 253.80. Above this level, the stock has a resistance at the earlier intermediate top of 259.50 and only a close past this level will result in the major trend of the stock turning up. Investors must stay away as of now as the current intermediate rise by the stock is only a trading opportunity.
IDFC has been staying well below its falling 30 WMA and has been exhibiting descending intermediate tops and bottoms and hence the major trend is down. The weekly MACD Histogram for the stock has been exhibiting a positive divergence, indicating that the selling pressure is reducing, as the stock is declining at a lower rate as compared to the decline during the first six months of 2008. This is positive in the short term.
The intermediate trend is already up as we have seen strong volumes build up in the past few days. The stock is currently facing a resistance at 63 and a minor decline in the coming week can be used by traders to look for long positions. The next important resistance for the stock is at 74.20, which is its earlier intermediate top and a close past this level will confirm a major uptrend.
HDFC
HDFC went into an intermediate uptrend on Thursday, but met with a strong resistance at the resistance level of 1,522. The stock has reacted on Friday in line with the indices and will have to close past 1,548 if higher levels are to be attained in the current intermediate rise. A drop below 1,340 will result in the intermediate trend fizzling out. On the upper side, above 1,548, the stock has a resistance at 1,625 and 1,745, where traders can look to book profits in case the intermediate uptrend continues. Investors must stay away as of now and must wait for the stocks and the indices to make bottoming formation before picking up long positions.
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