The Sensex and the Nifty dropped into an intermediate downtrend as they dropped below their respective intermediate downtrend triggers of 19,255 and 5,714, respectively. The CNX Mid Cap index has yet to drop into a fresh intermediate downtrend and will have to close below 7,215 to confirm the same. We are seeing divergent trends in the pivitols as the tech sector, the automobile sector and the cement sector have already began correcting, and few stocks from the oil and gas sector are still strong. This divergent trend could result in the indices staying sideways before moving higher and starting another fresh intermediate uptrend.
For the Sensex and the Nifty to reinstate the intermediate uptrend, these indices must close above 20,238 and 5,957 respectively. The indices are at the lower end of the rising channel and if they are able to take a support at the lower trendline of this rising channel, the intermediate uptrend could be reinstated. However, if the Sensex drops below 18,000 and the Nifty below 5,400, than the correction is likely to be a bigger one.
In the last week, the Sensex lost 4.59% and was followed by the Nifty which lost 3.94%. The CNX Mid Cap index ended 1.10% lower. Among the sectors, the BSE Bankex was the largest loser ending 7.90% lower and was followed by the BSE IT sector which lost 7.25%. All the sectors ended in red and the least decline was seen in the BSE Consumer Durable sector which lost 0.36% and was followed by the BSE Oil & Gas Index which lost 1.22%.
The earlier intermediate bottom formed by the indices on August 17, is quite below the current levels. The Sensex had the earlier intermediate bottom pegged at 13,779 and the Nifty at 4,002. As these levels are far away, the major uptrend will remain intact.
The market breadth was weak as the indices declined on all the four trading days. As during most of earlier period during Diwali, markets are subdued and this is also the case in the current year. Investors and traders have to scratch their heads as trading on the short side is not profitable as the major trend is up and few stocks are trending on the upper side.
There is a rise in the activity in the oil and gas stocks and today we will take a look at some of these stocks.
Gail is in a major uptrend, and is one of the few stocks which is moving higher as the indices are correcting along with most of the other stocks and pivitols. There is an improvement in the oil and gas stocks in the past few weeks and Gail went into a fresh intermediate uptrend after staying sideways between 355 and 445 for a month.
The relative strength line for the stock has turned bullish for the first time now and though the major trend of the stock is up since a while, the stock has started to outperform the indices only now. The trading volumes have shot up since mid September indicating that the bulls have become quite active in the stock, and any pull back towards the support between 420 and 440 in the coming week, must be used by investors and traders to pick up long positions. The weekly MACD histogram for the stock is bullish and is making new highs indicating that the stock will follow suit. Investors must hold on to the stock with a stop at 360 and trail the stop as the stock moves higher.
Chennai Petro
Chennai Petro saw a bullish activity in the last week as the stock is near its all time high of 354 and is poised to make it to new high territory in the coming week. The stock went into a major uptrend in July and after consolidating between 240 and 310 for the past two months, the stock has again broken out of this sideways zone and went into the new high territory in the last week. The relative strength line for the stock is improving and will improve further as the stock is moving higher while the indices are correcting. There is an improvement in the volume and the money flow indicator has turned positive. Investors must keep a stop loss at 257 and position traders must keep a stop loss at 305. Trail the stop as the stock moves higher.
Indian Oil went into a major uptrend in the last week as the stock closed past its earlier intermediate top for the first time. The stock is still facing a good resistance between 510 and 530 and only a close past 530 will confirm a major uptrend.
This will also result in a breakout from the sideways mode and the stock will head higher towards the next resistance which is at 585 and 622. Oil stocks have been laggards due to the government policy and a breakout of all the resistance zones may not occur soon unless there is a drastic change in the policy. Thus, the current intermediate rise in this stock is a trading activity on the long side.
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