Pivotal Stocks: Some More Steam Left

Updated: Aug 31 2003, 05:30am hrs
The intermediate uptrend is now in the sixth week as we are witnessing weak relative strength stocks like the tech stocks and the consumer durables moving higher while the other sectors have been taking a breather. The rise in the activity in the weak relative strength stocks suggest that an intermediate top may be nearer and an intermediate correction, which is overdue, also may be nearer.

Investors are booking profits in the old economy stocks and are getting into either sectors which have not participated in the current bull run or are getting into defensive plays.

Today, I will take a look at a few pivotals and see how they are poised. The indices will continue to remain in an intermediate uptrend as long as the heavyweights stay in an intermediate uptrend.

But, once the frontline pivotals start correction, the correction is bound to spread to other stocks and sectors. Hence keeping a track of the pivotals is important.

Hindustan Lever
Hindustan Lever is in a major uptrend, but its relative strength line has been staying below its zero line suggesting that the stock is underperforming the indices. Though the indices is moving higher and exhibiting higher tops, Hind Lever has exhibited a lower minor top and a fall below 178.55 will confirm a start of an intermediate correction. As the relative strength line of the stock is weak, the stock is likely to drop more than the indices.

Thus as long as the stock stays above this target, the intermediate uptrend by the indices is likely to remain intact. The stock has its 200 DMA around 165 and the 50 DMA is at 172 where the stock will receive support once it goes into an intermediate downtrend.

On the bullish side, if the stock is again able to move past 192.80 and next above 195, the intermediate uptrend will be intact and the stock and the indices will continue to move higher. Hence, both traders and investors must keep a close track of the stock.

Tisco is one of the better performing pivotals and is also in a major uptrend. As the stock is outperforming the indices, the relative strength line for the stock is well above its zero line.

The stock is currently moving in a range between 236 and 265. A bigger correction in the stock will start if the stock drops below 236 and the intermediate uptrend for the stock and the indices will continue if the stock moves past 265 and closes above this level.

Thus traders and investors must keep these levels in mind. As the stock is outperforming the indices, and the stock well above its 50 DMA (10WMA), a start of an intermediate correction will result in the stock pulling back towards its 50 DMA. Todays level for this moving average is at 210 as will continue to move higher.

Reliance Ind
Reliance Ind is also in a major uptrend, but its relative strength is neutral. This means that the stock is neither underperforming the indices nor out performing. Its performance is as good as the indices and hence the relative strength line is slightly above its zero line and continues to move sideways.

The weekly MACD for the stock continues to move higher suggesting that there is some more steam left in the stock. Also the daily momentum indicator is moving higher suggesting that the stock may take some more time before dropping into an intermediate downtrend. In the short term, the stock has met with a resistance at the 390/400 level, which should be watched closely. Currently the target for the stock to drop into a fresh intermediate downtrend is at 388 and a close below this level will trigger and intermediate correction.