The intermediate uptrend gained momentum as the realty sector continued to outperform the indices. This sector was the weakest during the September-October decline and now short covering along with value buying at lower levels has helped the sector to once again outperform for the third consecutive week as it gained 18.66% and was followed by the BSE Consumer Durable index, which gained 14.67. The Sensex ended 4.23% higher and the Nifty gained 5.35% in the last week. Among the weak sectors, the BSE IT sector gained 2.44%, which was followed by the BSE Metals index gaining 3.22%.
The current intermediate rise is a rally within the major downtrend as the earlier intermediate top is at 15,580 for the Sensex and 4,650 for the Nifty. These levels will have to be crossed in the current intermediate rise if the major trend has to turn up. The equivalent level for the CNX Mid Cap index is at 6,016. The higher the current rally can take in the current intermediate uptrend, the greater will be the chance of the indices making a higher intermediate bottom in the next intermediate decline and the higher will be the probability of the major uptrend starting. A higher intermediate bottom will be the first sign of a start of a new bull run and investors will have to wait for a higher bottom to form. Till such time trade in the direction of the intermediate trend.
The targets for the Sensex and the Nifty to drop into a fresh intermediate downtrend are at 9,281 and 2,812 respectively. The equivalent level for the CNX Mid Cap index to drop into a fresh intermediate downtrend is at 3,547.70. A drop by the Sensex below 9,633 and by the Nifty below 2,922 will be the first sign of a start of a minor decline and a correction to the current uptrend.
The rate of rise in the current intermediate uptrend has been slower than the rate of decline by the indices since November. This also confirms that the current rise is a corrective rally and traders must look for small profits for the long positions that they are holding. The indices have closed past their 61,8% retracement level of the earlier decline and the Sensex is headed to test the next resistance of 10,400.
The Nifty is already closer to the resistance of 3,115 and a close past this level will take the Nifty to the 3,250-level.
One of the sectors which has seen a good improvement in the current rally are the Refinery stocks. These stocks have not participated in the earlier bull run due to high crude prices and now with the crude prices dropping sharply and also with the dollar weakening, the biggest beneficiary are these stocks. Not many are having a big holding in this sector, as it was not the favourite sector. This means that there are few over-head resistances to this sector and traders and investors can look for long positions in this sector. A few stocks have already gone into a major uptrend, which suggest that the sector has bottomed out. I will take a look at some of the stocks in this sector.
HPCL
HPCL went into a major uptrend when the stock closed past the earlier intermediate top of 253.20. This breakout has happed with a strong surge in trading volumes and is a bullish sign. Any pull back towards the support of 250-255 in the coming week can be used by position traders and investors to pick up long position in the stock. The stock is headed towards the resistance of 335 where partial profits can be booked. The relative strength line for the stock has improved and is making rising tops and bottoms indicating that the stock is outperforming the indices.
BPCL is another stock in the refinery sector, which has been exhibiting a bullish relative strength and will confirm a major uptrend once the stock closes past its earlier intermediate top of 385. A breakout with a strong volume will confirm that the major trend of the stocks is up and higher levels will be seen like HPCL. The stock is at this resistance level and the coming week will decide the fate of the major trend. The trend of the stock is already up and traders can look for a minor correction to get into the stock. A close past 385 with strong volumes will mean that the stock is headed to the next resistance level of 480.
IOC is also in an intermediate uptrend like most of the stocks in the current rally, but is still well below its earlier intermediate top of 453. The stock will have to close past the 453-level in the current intermediate rise to go into a major uptrend and investors will have to wait for a while before the major uptrend is confirmed. Also, the stock has a strong resistance at the 450-level where traders can first look for profits in the long positions and only after the major uptrend is confirmed, investors can look for long positions.
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