The Nifty closed above the weekly resistance zone of 3,070-3,160 while the Sensex is just at the upper end of the resistance zone of 10,170-10,270 and is poised to follow suit soon. More stocks have closed above their October intermediate tops suggesting that the indices will follow suit soon. The CNX Mid Cap index is still below the weekly resistance zone of 3,720-3,825 indicating that mid cap stocks are likely to see a better performance in the coming week.
Once the Sensex closes clearly past the weekly resistance zone, it will be headed towards the 200 DMA, which is at 11,400 and the 200 DMA for the Nifty is at 3,455. These long term moving averages are declining and their values will move lower in the coming days and weeks.
The indices have already closed past their first intermediate tops in the last week and are moving closer to the next intermediate top of 10,470 for the Sensex and 3,240 for the Nifty. Once the Sensex closes past this top, it has one more intermediate top of 10,945 to cross and once this happens, the major uptrend will be confirmed. The CNX Mid Cap index will have to move past 3,978 to confirm a major uptrend.
After the indices saw strong profit taking on Monday, they bounced back on the next three trading days and wiped out all the losses incurred on Monday. The targets for the Sensex and the Nifty to drop into a fresh intermediate downtrend are at 9,520 and 2,962.40 respectively. The equivalent target for the CNX Mid Cap index to drop into an intermediate downtrend is at 3,248. As long as the indices continue to exhibit ascending minor tops and bottoms, the intermediate trend remains up and traders must trade on the long side.
With the indices closing past their first intermediate tops in the last week, the possibility of the major uptrend having started is high. Investors must use the first intermediate correction, possibly during election time, to pick up long positions.
The Sensex gained 2.99% in the last week and the Nifty ended 3.29% higher. The CNX Mid Cap index gained 4.78%. Among the sectors, the BSE Realty sector was the largest gainer ending 9.83% higher and was followed by the BSE Oil & Gas sector, which gained 6.82%. On the weaker side, the BSE FMCG sector ended 0.68% lower and was followed by the BSE Bankex, which lost 0.14%.
Commodity stocks are improving and are likely to improve further in the current rise. I will discuss some of these stocks, which are poised to move higher and traders can look for minor corrections in the coming week to pick up long positions in these stocks.
Hindustan Zinc closed past its earlier intermediate top of 446 and is in a major uptrend. The weekly MACD histogram for the stock has been exhibiting ascending tops indicating that the momentum is strong and higher levels will be seen by the stock. The next important resistance is at 555 and as this level is far away, traders and investors can use corrections to pick up long positions in the stock. Supports on the daily charts are at 428 and 401. Thus any correction towards the first support can be used to look for long positions in the stock. With the relative strength turning bullish, the stock is headed towards the weekly objective of 555.
SAIL
SAIL has made a nice bottom and is another stock, which has already crossed its October highs ahead of the indices and hence the relative strength line for the stock is bullish. The weekly momentum indicator for the stock is bullish and higher levels will be seen towards the monthly resistance of 148. Thus, traders and investors must use declines to pick up long positions. On the daily charts, the stock has a support at 93 and 88 and as long as the correction ends above these levels, the intermediate uptrend is intact and higher levels will be seen.
ONGC confirmed a major uptrend in mid March and after breaking above the earlier intermediate top, it consolidated at the highs. On Thursday, the stock broke out of this sideways consolidation and is headed higher towards the next target of 920. Above this level, the next objective is at 1000 and with the major trend up and the relative strength strong, traders and investors must look for long positions on a pull back towards the support of 816, which is its 200 DMA. Few stocks have closed past their 200 DMA and ONGC is one such stock indicating a strong relative strength.
For more details contact mayur_s@vsnl.com