The indices attained new peaks as the Sensex has come very close to the 18,000 level, where traders and investors have been booking partial profits after the strong run up that has been seen in the past two weeks. The indices have paused in the last two trading days of the last week, and weak relative strength stocks have now started going into a fresh intermediate up trend, indicating that the indices could be closer to an intermediate top. Even the bullish percent index is the highly overbought area, suggesting some cooling off is possible here. After the strong run up we have seen since mid August, some correction will be seen soon.

The Sensex gained 2.79% and the Nifty 3.28%. The CNX Mid Cap index ended 0.63% higher, indicating that the activity in the last week was more in the large cap stocks. Among the sectors, the BSE Capital Goods sector was the largest gainer, ending 7.24% higher, and was followed by the BSE Oil & Gas sector, which gained 5.73%. On the weaker side, the BSE Bankex ended 2.58% lower, and was followed by the BSE FMCG sector, which lost 2.51%.

The market breadth was mixed in the last week, as we saw declines score over the advances on three of the four trading days. The trading volumes remain bullish on three days, while on Friday we saw the decline by the indices was accompanied by higher volumes. In the coming week, we will watch the volume action especially on down days, and any declines with high volumes will be a sign of distribution. If we see five or more such days, then it will confirm the start of an intermediate correction.

The targets for the Sensex and the Nifty to drop into a fresh intermediate downtrend are far away and are at 15,350 and 4,445 respectively. The equivalent target for the CNX Mid Cap index to drop into a fresh intermediate downtrend is at 6,267. A minor decline followed by a minor rise will raise these targets.

Few sectors like the power and the metals sectors have done exceedingly well in the current intermediate rise, while few sectors like the Media sectors, which were leading the earlier intermediate rise, are subdued and are lagging the indices. If the indices start an intermediate correction now, weak relative strength sectors will be the first to correct, and investors and traders must look for profits in these sectors. I will take a look at this sector today. Investors must first book profits in stocks, which are exhibiting a weak relative strength.

NDTV is in an intermediate uptrend like most of the stock currently, but is still well below its earlier intermediate top of 453.65. The indices are well above their earlier intermediate tops, resulting in a weak relative strength line. The relative strength is falling even as the stock is in an intermediate uptrend, and an intermediate top at this stage will mean that the stock has exhibited descending intermediate tops, and a drop below its earlier intermediate bottom of 287 in the next correction would result in a major downtrend for the stock. A drop below 375 will result in an intermediate downtrend for the stock, and traders and investors must look for profits in the long positions held. Traders can also look for short positions below 375.

ZEEL is another stock in the media sector, which is facing a strong resistance at the earlier intermediate top of 361. The stock is in a major uptrend, but if the stock drops into an intermediate downtrend at the current level, it is likely that a possible double top will be formed by the stock. This will be confirmed if the stock drops below its earlier intermediate bottom of 273. Thus 273 is the stop for the long positions held by investors. The weekly MACD Histogram is exhibiting a negative divergence, indicating drop in the upward momentum. Thus, investors may look for partial profits at the current level and hold the rest of the position with a stop at 273.

Adlabs is also facing a strong resistance at its earlier intermediate top like ZEEL, and if the stock drops into an intermediate downtrend here, it will test its earlier intermediate bottom of 417. A drop below 417 in the next intermediate correction will mean a double top formation. The weekly MACD Histogram is exhibiting a negative divergence, indicating a loss in momentum in the current intermediate rise, and investors must book partial profits in the long positions at the current levels, and keep a stop of 417 for the balance long positions. There are many stocks, which have not made above their earlier intermediate tops in the current intermediate rise, and investors and traders must book profits in some of these stocks first.

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