The Satyam saga resulted in the indices dropping sharply lower in the past two trading sessions, as the CNX Mid Cap index has already dropped below its earlier minor bottom of 3,540 and is in an intermediate downtrend, while the Sensex has come closer to its intermediate downtrend target of 9,162. The Nifty dipped for a few seconds below its intermediate downtrend target of 2,812, but has closed above it, indicating that the intermediate downtrend is still not confirmed. Scores of stocks have dropped into an intermediate downtrend in the past two days suggesting that the indices are likely to follow suit and the intermediate uptrend which had started on November 20 may have ended on January 7.
If the indices drop below their respective targets and drop into a fresh intermediate downtrend, the minor highs made in the last week of 10,470 by the Sensex and 3,147.20 by the Nifty will be the lower intermediate tops and the new targets for the indices to cross to get back into a major uptrend. The equivalent target for the CNX Mid Cap index is at 3,978. The Nifty has been staying between 2,800 and 3,150 in the past few weeks and this means that the indices have been trading in a sideways range in this zone.
The Sensex has been trading between 9,150 and 10,500 in the past few weeks and a move out of this range will result in a trending mode. As long as the indices stay in this range, traders must look to day trade or trade with a short term objective. Once a trending mode starts, we can start looking for positions.
In the last week, the Sensex lost 5.54% and the Nifty ended 5.70% lower. The largest loser was the BSE Realty sector, which lost 24.61% and was followed by the BSE Consumer Durables, which lost 9.74%. On the positive side, the BSE Auto sector ended 0.10% higher and was followed by the BSE FMCG index, which ended with a small loss of 0.63%.
The indices have already rallied for the past eight weeks and are ripe for an intermediate correction. A higher intermediate bottom in the next intermediate decline will be the first sign of the indices suggesting that the major trend is up. On the other hand, if the Sensex drops below 8,316 and the Nifty below 2,502, than it will mean that the indices will make lower levels and also drop below October lows. Thus, the next intermediate correction will give us more insight into the possibility of a major uptrend. Investors must keep a track of this and can look for long positions if the indices make a higher intermediate bottom.
Investors must keep a track of some more stocks, which could take a lead in the next bull run if the indices were to make a higher intermediate bottom in the next intermediate correction. Today, I will take a look at cement stocks and see how these stocks are faring.
Grasim Industries
Grasim Industries is in a major downtrend as the stock has been exhibiting descending intermediate tops and bottoms since it made a major top in February 2008. The stock is still in an intermediate uptrend and is not affected by the Satyam weakness. On the weekly chart, the stock has a resistance at 1,380 and it has currently at this level. A strong close above this level will be the first sign of strength as the stock could be heading to the next resistance level of 2,111. The current intermediate rise has seen a string rise in trading volume indicating that the bulls have become active in the stock. A higher intermediate bottom above its earlier bottom of 8,31 will be the first sign of the change in the major trend and investors must keep a track of the stock in the next correction.
India Cement
India Cement has moved past important resistance levels in the current intermediate rise and is heading higher towards the next resistance of 145 if the indices bounce back from their current support levels. The relative strength line for the stock has turned bullish, indicating that the stock is outperforming the indices and could well be a candidate to make a higher intermediate bottom in the next intermediate correction. Look for a higher intermediate bottom in the next correction to pick up long positions in the stock. A higher intermediate bottom is the first sign of a major uptrend.
Ambuja Cement
Ambuja Cement is also in an intermediate uptrend and has held out nicely in the last week after the indices and scores of stocks have witnessed a strong decline. The stock has been staying above the support of 69 and as long as the indices stay above this level, the intermediate trend will be up The weekly MACD histogram is making rising tops, indicating an improvement in the upward momentum and this suggest that the stock will follow suit soon. Again, investors must look for long positions if the stock makes a higher intermediate bottom in the next intermediate correction.
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