The indices gained for a seventh successive week as the Sensex gained 2.78% and the Nifty ended 2.85% higher. Among the sectors, the BSE Metals index gained 5.51% and was followed by the BSE Tech Index, which gained 5.41%. On the weaker side, the BSE Consumer Durable index ended 1.12% lower and was followed by the BSE FMCG sector, which registered a small gain of 1.15%.
After the minor decline in the initial part of the week, the indices saw a smart improvement on Thursday and Friday and this resulted in the indices and most of the stocks making a higher minor bottom. The new targets for the Sensex and the Nifty to drop into a fresh intermediate downtrend are at 10,715 and 3,296.90 respectively. The equivalent target for the CNX Mid Cap index to drop into a fresh intermediate downtrend is at 3,798.30. The Sensex and the Nifty have closed past their earlier intermediate tops and are in a major uptrend. As the current intermediate uptrend is more than seven weeks old, investors must wait for the next intermediate correction before looking for long positions. The next intermediate correction could start once the elections end and the uncertainty begins.
The Sensex has a resistance at 11,330 and a close past this level will result in the test of the 11,700 level. The Nifty has a resistance at 3,487 and a close above this level will result in the Nifty heading towards the next resistance level of 3,600. On the lower side, the indices have a support at their intermediate downtrend targets and a close below these levels will result in the Sensex heading towards the 9,600 and the Nifty towards the 2,960 level. Any pull back towards this support in the next intermediate correction will give investors an opportunity to look for long positions.
Majority of the frontline stocks are already in an intermediate uptrend and the mid-cap and small-cap stocks have already been exhibiting strong moves in the past two weeks. The strong move in the past seven weeks has been accompanied by a strong move by the bullish percent index. This suggests that the current intermediate rise is over bought and we could see the start of a fresh intermediate correction. Thus, traders must look for small short-term moves in the current intermediate rise with strict stops and as suggested earlier, investors must wait for the next intermediate correction to get.
Many stocks have closed past their October highs and some of these stocks must be picked up in the next intermediate correction. The stops for the investors are currently far away and hence an intermediate correction will raise the stops for the long positions picked. I will today take a look at a few pivitols as they will decide the fate of the current intermediate rise.
Reliance Industries is one of the strongest pivitols and has been exhibiting a bullish relative strength. The stock has been outperforming the indices and hence the relative strength has been improving and is closer to its earlier top. The daily and the weekly indicators remain bullish and the next important resistance to the stock is at 2,030 and 2,050. Thus traders must continue to hold on to their long positions with a stop at 1,670 and must trail the stop as the stock moves higher. On the lower side, the stock has a strong support at 1,375 and any pull back towards this support in the next intermediate correction must be used by traders to pick up long positions.
Tisco
Tisco has also closed past its October intermediate highs in the current intermediate rise but is underperforming the indices. The stock is trading below its falling 30 WMA and has been facing a strong resistance at this long term moving average. Thus, unless the stock is able to close past the 30 WMA with strong volumes, the stock will continue to languish and could test the recent intermediate bottom of 148.65 in the next intermediate correction. Thus, investors must avoid weak relative strength stocks in the next intermediate correction and must look for strong stocks, which will outperform the indices.
State Bank of India
State Bank of India is near the October high of 13,340 and a close past this level will confirm a major uptrend. Thus, the indices have already closed past their October intermediate tops and are in a major uptrend, while SBI is still lagging behind and has yet to close above the October highs. This means that the relative strength is bearish and investors must avoid such stocks. The weekly resistance level is at 1,382, which is near by and traders must look for profits in the long positions held. Support to the stock is at 1,145 and 978.
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