The intermediate downtrend, which had started on January 7, is still intact, as more stocks dropped into an intermediate downtrend. But not all sectors are breaking down in the current intermediate downtrend and if the indices were to make a higher intermediate bottom in the current intermediate downtrend, it would suggest that the new bull run could start. This will be confirmed if the indices are able to close past their earlier intermediate tops of 10,470 by the Sensex and 3,147.20 by the Nifty. The current bear market has been intact since January 2008, as the indices continue to exhibit descending intermediate tops and bottom. Thus, investors and traders must keep a close watch at the current intermediate downtrend and if a higher intermediate bottom is formed, then investors can start looking for long positions in strong relative strength stocks. On the other hand, if the indices were to drop below the October lows in the current intermediate downtrend, then investors would like to see a panic bottom to start bottom fishing.
The target for the Sensex and the Nifty to get back into a fresh intermediate uptrend is at 9,410 and 2,868.20 respectively. The equivalent target for the CNX Mid Cap index to get back into an intermediate uptrend is at 3,544.45.
In the last week, all the indices ended in red, as the Sensex lost 6.96% and the Nifty ended 5.30% lower. The biggest loser was again the BSE Realty sector, which ended 12.19% lower and was followed by the BSE Metals index, which lost 11.38%. The sectors, which registered a lower percentage drop, were the BSE FMCG sector, which ended 2.20% lower and was followed by the BSE Power sector, which lost 3.51%. In the short term, the Sensex had gapped lower in the last week and the gap between 9,160 and 9,273 will be the first resistance on the upper side, which the Sensex will have to cross if any attempt were to be made by the indices to move past the intermediate uptrend target. If any minor rise in the coming week is not able to cross past this resistance zone, than it will mean that the indices are headed lower. A drop below 8,316 by the Sensex and 2,502 by the Nifty will mean a test of the October lows and even new lows for the current bear market.
If the indices were able to make a higher intermediate bottom, then one of the sectors, which could take a lead, could be the power sector. Investors must however wait for the indices to bottom out before taking any calls on this sector. I will discuss some stocks in this sector today. Investors must scan their database to search for stocks with bullish relative strength.
NTPC has been exhibiting a bullish relative strength as the stock has not been declining at the same rate in the current intermediate downtrend. Infact, the stock has been moving sideways in the current intermediate downtrend and is well above its earlier intermediate bottom of 113. Even if the stock were to drop below 165 and go into an intermediate downtrend, the probability of the stock making a higher intermediate bottom are quite high and investors must keep a close watch on the stock. The stock has a support at the 165 level and a resistance at the 186 level. A close past 186 in the next intermediate rise will confirm a major uptrend for the stock.
Power Grid was listed only in October 2007 and hence does not have a large database like most of the stocks. The major trend of the stock is down as the stock has been exhibiting descending intermediate tops and bottoms.
The intermediate trend of the stock is up even though the indices are moving in an intermediate downtrend and this has resulted in an improvement in the relative strength line. The earlier intermediate top for the stock is at 104.90 and this will have to be crossed in the current intermediate uptrend if the major trend has to turn up. On the other hand, there is a good possibility that the stock could make a higher intermediate bottom in the next intermediate correction and we will get a lower target for the major uptrend. Investors must keep a close watch on such stocks, which are exhibiting a bullish relative strength.
Power Finance Corp
Power Finance Corp was listed in February 2007 and is also in a major downtrend as the stock has been exhibiting descending intermediate tops and bottoms. It is one of the very few stocks, which has moved closer to its September 2007 highs and is still in an intermediate uptrend. It will have to close past 150 in the current intermediate rise, if the major trend of the stock has to turn up. The stock has a support at 118 and is very likely to make a higher intermediate bottom even if the indices were to make new lows. The relative strength line is strong and investors must keep a close watch on the stock.
For more details contact mayur_s@vsnl.com