Pivotals that will push the market in 2008

Written by Mayur Shah | Updated: Dec 30 2007, 04:54am hrs
After staying subdued in the last week, the intermediate uptrend gained momentum in the current week as the Sensex gained 5.45% and the Nifty ended 5.43% higher. The activity remains high in the small-cap and the mid-cap stocks as the BSE Small Cap index gained 9.21% and the CNX Mid Cap index gained 6.63%. Since Diwali, the activity in the mid-cap and small-cap stocks is on the rise as these stocks have been outperforming the Sensex and Nifty. This feature will continue and investors and traders must look for trades in these stocks.

Among the sectors, the BSE Metals index again bounced back as it gained 9.17% and was followed by the BSE Consumer Durable index, which gained 8.51%. On the weaker side, the BSE Auto index lagged behind as it ended 0.97% higher and was followed by the BSE Health Care index, which gained 2.27%.

The market breadth was bullish throughout the week as advances scored over declines on all the days of the last week. The trading volumes were below their 50 days average on three of the four trading days. The Sensex and the Nifty have been staying in a large trading range and once they move out of this trading range, we are likely to see higher trading volumes improve in the coming week.

The intermediate trend of the indices is up and the targets for the Sensex and the Nifty to drop into a fresh intermediate downtrend are at 18,886 and 5,676 respectively. These levels will be raised to Fridays low of 20,022 and 6,021 after the indices move past Fridays high in the coming week. The equivalent level for the CNX Mid Cap index to drop into an intermediate downtrend is at 8,429.

The recent intermediate lows made by the indices on the November 22 and now important bottoms and as long as the next intermediate correction ends above these levels, the major uptrend remains intact. These levels for the Sensex and the Nifty are at 18,182 and 5,394 respectively. The equivalent level for the CNX Mid Cap index to drop into a major downtrend is at 6,462.

There are a few pivotals, which are poised to breakout and help the Sensex and the Nifty to make new highs in the coming New Year. I will take a look at some of these pivotals that position traders and investors can take a look and position them for some gains once they breakout.

Century Textiles

Century textile has been one of the leaders in the pivotals and has been an outperformer for a while. The relative strength line for the stock has been making new highs suggesting that the stock continues to outperform the indices. In the past one month, the stock has been trading sideways between 1,035 and 1,174 and went into a fresh intermediate uptrend on Friday with a strong surge in trading volumes. Both, traders and investors can pick up long positions in the stock as it is headed higher after the breakout from the sideways mode. Investors must hold on to the stock with a stop at 1,035 and must continue to trail the stop as the stock moves higher. The stock is already in the new high territory and there are no overhead resistances.

Reliance Industries

Reliance Industries and all the group companies have been outperformers in the current bull-run. Reliance Industries has been moving sideways between 2,606 and 2,960 in the past six week and is poised to move past the upper resistance of 2,960 giving a good opportunity for position traders and investors to pick up long positions in the stock.

The earlier intermediate uptrend was accompanied by a strong surge in trading volumes suggesting higher levels in the next intermediate rise. The relative strength line has been making new highs suggesting that the stock has been outperforming the indices and investors must hold on to their long positions. Currently, the stop for their long position is far away and is at the 1,700 or they can keep it at the 30 WMA. This stop will be raised after the stock breakout of the upper resistance of 2960.

HDFC Bank

HDFC Bank is in a strong major uptrend and has been exhibiting ascending intermediate highs and lows and has been trading above its 30 WMA for a while. Like most of the stocks discussed today, HDFC Bank is trading sideways between 1,425 and 1,798 for the past eight weeks. The relative strength line for the stock is bullish indicating that the stock is outperforming the indices. A breakout from the current sideways formation with a strong surge in trading volumes will give investors and position traders a good opportunity to pick up long positions in the stock. Investors can use 1,425 as the stop and must trail the stock as the stock moves higher.

For more details contact mayur_s@vsnl.com