The indices took a support just above their 200 DMA and we saw a minor rise in the last week. After dropping below the last weekly support in the last week, we have not see a follow up in the coming week, suggesting a possibility of a rally here. Had the indices followed through in the last week, lower levels towards the monthly supports would have been seen. Now, as the possibility of a rally have increased, lets look at the resistance the rally will face in the coming week.
The first hurdle that the Sensex and the Nifty face are at 16,260 and 4,853 level. Above this level, the next resistance is at 16,623 and 4,966 respectively. The targets for the Sensex and the Nifty to get back into a fresh intermediate uptrend are at 16,553 and 4,951.15 respectively. These are also important resistance levels. The equivalent level for the CNX Mid Cap index to get back into an intermediate uptrend is at 7,446.20.
Above all these resistance levels, the more important level is the weekly resistance level of 16,825 for the Sensex and 5,011 for the Nifty. As long any rally stays below these weekly resistance levels, the medium term bearish view will hold. If the rally is unable to move past these weekly resistance levels, than the next intermediate downtrend will be strong and we will see lower levels towards the monthly supports of 13,505 for the Sensex and 4,056 for the Nifty.
On the other hand, if the indices are able to move past the weekly resistance in the next intermediate uptrend, than higher levels to the recent high of 17,790 for the Sensex and 5,310 for the Nifty will be seen. Thus, till the budget we are likely to see the indices moving towards their weekly resistance and the budget will decide if the rally has more legs to move higher and take the indices to new high levels or we see lower levels towards the monthly supports or even lower. Also, the fate of the major trend will be declined after the0 next intermediate uptrend. If the intermediate uptrend is able to move past the weekly resistance, the bulls have more legs and the major uptrend continues; on the other hand, if the rally ends near the weekly resistance, than the major trend is down and traders must look south and investors must stay away.
In the last week, all the indices ended in the positive territory. The Sensex and the Nifty each gained 2.29% and the CNX Mid Cap index gained 3.11%. Among the sectors, the BSE IT sector was the largest gainer ending 4.66% higher and was followed by the BSE Realty index which gained 4.12%. On the weaker side, the BSE Healthcare index registered a small percentage gain of 0.82% and was followed by the BSE Power sector which gained 1.28%. Not many stocks have gone into an intermediate uptrend in the past few days and for an intermediate rise, I would like to see more stocks going into an intermediate uptrend if the indices have to follow suit.
Some two wheeler stocks are exhibiting strength and are the first to go into a fresh intermediate uptrend. If the indices do confirm an intermediate uptrend these stocks will lead the rise.
Bajaj Auto has already gone into an intermediate uptrend and was the first few stocks which have gone into a fresh intermediate uptrend. The stock is at the short term resistance level of 1,798 and 1,820. Short term traders can look for profits at these resistance levels. Once this level is crossed, the stock will be headed towards the weekly resistance of 1,867. At this level, more profits have to be booked. The weekly momentum indicators have been exhibiting a negative divergence and suggest loss of momentum at higher levels. Thus position traders must look for profits at the resistance levels suggested here. Investors must hold on to their long positions with a stop at 1,620.
Hero Honda is another stock in the two wheeler sector which is in a strong intermediate rise and has reached the first short term target of 1,708. Short term traders must look for profits at this level. Above this level, the stock will be heading towards the weekly resistance of 1,755 and the all time high level of 1,808.70. Only a close past this resistance will be very bullish and will take the stock into a new high territory. Investors must continue to hold on to their long positions with a stop at 1,480. Trail this stop higher as the stock moves higher. Any short term pull back towards the support of 1,620 must be used by traders to look for long positions.
TVS Motors is another stock in this sector, but the stock has yet to get back into an intermediate uptrend. The short term resistance is at 72 and 72.80 and a close past 72.80 will take the stock into an intermediate uptrend. The first resistance to the stock is at 79.20 where traders can look for profits. The relative strength is slightly bullish and only after the stock get back into an intermediate uptrend or exhibits a higher minor bottom, traders must look for long positions.
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