Mid-caps northward bound

Updated: Dec 31 2006, 07:30am hrs
The intermediate trend of the indices turned up in the last week as the indices have exhibited ascending intermediate tops and bottoms. This means that the intermediate downtrend lasted for five trading sessions and an intermediate bottom has been formed on December 12. Even the mid-cap and the small-cap indices have gone into an intermediate uptrend and with the indices continuing to exhibit ascending intermediate tops and bottoms, the bull-run continues and the major trend remains up.

With the intermediate trend up, the new targets for the Sensex and the Nifty to go into a fresh intermediate downtrend are at: 13,182 and 3,768 respectively. The equivalent target for the CNX Mid Cap index to go into a fresh intermediate downtrend is at 4,888 respectively.

The Sensex gained 2.34% in the last week and the Nifty ended 2.46% higher. The CNX Mid Cap index gained 3.64% and for time after a number of months, it has outperformed the frontline indices. The CNX Mid Cap index is exhibiting a higher strength as compared to the indices as the CNX Mid Cap index has already closed past its earlier intermediate top while the Sensex and the Nifty have to do so. This means that the activity in mid-caps has been higher than the frontline stocks and if this continues, traders and investors must then look at the mid-cap stocks from now for higher gains.

IT stocks continue to register higher gains in the past few weeks as the CNX IT index was the largest gainer in the last week gaining 4.92% and was followed by the BSE Consumer Durables index which gained 4.54%. The BSE Bankex was the next as it ended 3.75% higher. On the weaker side the BSE Oil and Gas index ended with a miniscule gain of 0.86%.

The market breadth was bullish on all the days in the last week even though the indices were subdued on the last two days. This also suggests that the activity in the mid-cap stocks is picking up and I would like this to continue in the coming weeks if the mid-cap and the small-cap stocks have to outperform the frontline indices. This market rotation is a sign of strength, indicating higher levels for the indices.

With the indices already in an intermediate uptrend, the values of the higher intermediate bottom for the Sensex and the Nifty are now important.

The Sensex has made an intermediate bottom at 12,801 and the Nifty at 3,657 and any intermediate correction must, in the next intermediate decline, end above this level for the continuation of the bull-run. The equivalent target for the CNX Mid Cap index to go into a major downtrend is at 4,655.

With the rise in the activity in the mid-cap stocks, I will today take a look at a few mid-cap stocks.

Titan Industries

Titan Industries was trading sideways between 660 and 850 in the past few months and the stock has now broken out of this sideways formation on Friday with a spurt in trading volume. This is a bullish sign indicating that the stock's major trend has again turned up and is a good time for investors to pick up long positions at the current levels.

The relative strength line has just started to improve as the stock was trading sideways since August, while the indices were improving. It is for the first time since that time that the stock has started to improve now and the relative strength will soon catch up. The weekly MACD for the stock has crossed its trigger line and is moving up indicating that the stock's momentum is strong and higher levels will soon be seen by the stock.

KPIT Cummins

KPIT Cummins is another stock in the mid-cap section which looks bullish and interesting. The stock is already in a major uptrend and has been exhibiting ascending intermediate tops and bottoms. The stock moved into the new high territory in the last week, gaining 94.25 points with a strong surge in trading volume.

Any pull back towards the support of 655 in the coming week must be used by traders to pick up long positions in the stock. The relative strength line for the stock is bullish and is exhibiting ascending tops and bottoms, indicating that the stock has been outperforming the indices. The weekly MACD histogram has turned up and had made a new high in the earlier intermediate uptrend, suggesting higher levels in the current intermediate rise. Keep a stop of 570 for the long positions held.

The author can be contacted at mayur_s@vsnl.com