The indices ended higher for the third consecutive week, as they are now heading towards some important hurdles. The Sensex is moving closer to its resistance at 17,950, which is the 50% retracement of the complete decline since January. The Nifty has an equivalent resistance at 5,400. The trading volumes in the current intermediate rally remain thin and have been dropping even as the indices moved higher, indicating that the current intermediate rise is a rally within the major downtrend.

The earlier intermediate tops for the Sensex and the Nifty are at 18,896 and 5,545.20 respectively and these indices will have to move past these levels in the current intermediate rise if the major trend has to turn up. Under these circumstances, investors must look for long positions in the next intermediate correction. Till such time, we will continue to assume that the major trend is down and we will trade the market in the direction of the intermediate trend.

The current intermediate has been going on since the March 18 and is quite mature. Most of the frontline stocks are currently in an intermediate uptrend. We are now seeing weak relative strength stocks going into an intermediate uptrend, which suggests that the intermediate rise is in a mature stage and an intermediate correction may not be quite far away.

The targets for the Sensex to drop into a fresh intermediate downtrend is at 16,589 and the Nifty is at 4,991. The equivalent target for the CNX Mid Cap index is at 6,797. These levels will be raised after a minor decline is accompanied by a minor rise. The Sensex ended 2.77% higher and was followed by the Nifty, which gained 2.28% in the last week. All sectors ended in the green and the strongest sector was the BSE IT sector gaining 7.27% and was followed by the BSE Reality sector, which gained 6.98%. On the weaker side, the BSE Metals index ended 0.81% higher and was followed by the BSE Oil & Gas index, which gained 1.39%.

The US markets remain in a strong intermediate uptrend as the DJIA has a strong resistance at the 13,150 level. Traders must keep a watch at this level and any correction in the US markets will also trigger a correction in other markets around the world.

Most of the sectors are in an intermediate uptrend, except cement stocks. These stocks continue to lag behind and we could see some improvement in these stocks in the coming week as we are currently seeing weak relative strength stocks improving. Today, I will take a look at the a few Reliance group of stocks and see how these stocks are faring as compared to the indices.

Reliance Inds

Reliance Inds is in an intermediate uptrend and is trading closer to its earlier intermediate top and a strong resistance zone between 2,650 and 2,700. A close past 2,700 with strong volumes will result in the major trend of the stock turning up and higher level for the stock and also the indices. A drop below 2,580 will turn the minor trend down and a decline further below 2,557 will result in the intermediate trend turning down. We will keep a close watch on the pivitols in the current intermediate uptrend and they will give future direction to the indices. The relative strength line for the stock is bullish, indicating that the stock is outperforming the indices. The coming week will decide if the stock is breaking out of the strong resistance level or is breaking down and taking the indices lower.

RPL

RPL is in a major downtrend as the stock has been exhibiting descending intermediate tops and bottoms. The stock is well below its earlier intermediate top of 259.80 and is not likely to cross this level in the current intermediate rise. The relative strength line has come very close to its earlier top and is currently facing a resistance at this level. The stock is also facing a resistance at the current level, which is also the 50% retracement level for the stock. A close with strong volumes above 206 will result in the stock moving towards the next resistance level of 220, while a drop below 189 will result in the end of the current intermediate rise.

RNRL

RNRL is the weakest of the stocks discussed today and is also in a major downtrend. While both Reliance Inds and RPL have retraced 50% of their earlier intermediate decline, RNRL is still well below its 38.2% decline, indicating that the stock is underperforming the indices. The relative strength line of the stock is weak and in case an intermediate correction starts, the stocks will break down more than RIL and RPL. The important resistance to the stock is at 142 while a drop below 113 will take the stocks into an intermediate downtrend.

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