A truncated bullish week as the Sensex closely touched my weekly target of 17,200 and the Nifty tested the target of 5,100 but closed just below it. These are important weekly resistance levels and close above these levels on a weekly basis will result in higher levels towards the next targets of 19,225 for the Sensex and 5,700 for the Nifty. However, as the current intermediate rise is already seven weeks old and weaker relative strength stocks have started participating in the intermediate rise lately, an intermediate correction does not look far away.

The targets for the Sensex and the Nifty to drop into a fresh intermediate downtrend are at 16,495 and 4,904 respectively. The equivalent level for the CNX Mid Cap index to drop into a fresh intermediate downtrend is at 6,477.80.

Though we had only three trading days in the last week, all the indices ended higher as the Sensex gained 2.65% and the Nifty ended 2.51% higher. The CNX Mid Cap index gained 1.38% and the BSE Small Cap index gained 1.84%. Among the sectors, the CNX IT was the largest gainer ending the week with a strong gain of 5.47% and was followed by the BSE Bankex which gained 5.27%. On the weaker side, the BSE Consumer Durable index registered the least percentage gain of 0.19% and was followed by the BSE FMCG sector which gained 0.49%.

We were closed on Friday due to Gandhi Jayanti, while a strong decline in the US on Thursday resulted in the DJIA dropping into an intermediate downtrend. This could result in a very weak start in the coming week and could trigger an intermediate downtrend here in the coming week. The correction was overdue as a few pivitols had already started to drop into an intermediate downtrend in the last week.

Once the Sensex and the Nifty drop below their respective targets given above, the Sensex will be heading towards the next supports of 15,430 and 15,300. The Nifty has supports at 4,600 and 4,570 respectively. These are important weekly support levels and a close below these levels could threaten the major uptrend. The rate of decline in the next intermediate downtrend is also quite important. A stronger rate of decline could signal more weakness and could threaten the major trend. On the other hand, a mild intermediate downtrend will signal the continuation of the major uptrend and higher levels in the coming months.

The earlier intermediate bottom for the Sensex and the Nifty are at 14,684 and 4,360 respectively. As long as the next intermediate correction ends above this level, the major uptrend will remain intact. A close below these levels in the next intermediate downtrend will confirm the end of the major uptrend. The equivalent level for the CNX Mid Cap Index is at 5,634.

Though the realty stocks have seen a strong rise since March 2009, they have been underperformers in the current intermediate rise. If the indices were to drop into an intermediate downtrend and follow the US markets, which it will do, than traders can look for short positions in this sector. I will take a look at some of these stocks today.

Unitech has already made an intermediate top on the September 8 and has been in an intermediate downtrend exhibiting minor tops and bottoms. In the first week of September, Unitech met with a resistance at the weekly resistance level of 116 and has reacted from there. It is closer to its first support of 102 and a close below this level will result in the stock heading towards the next target of 90.40. Traders can look for short positions with a stop at 111 and must trail this stop as the stock moves lower. The earlier intermediate bottom for the stock is at 81 and a close below this level in the current intermediate downtrend will result in the major trend of the stock turning down.

Noida Tollbridge was moving sideways even as the indices were in an intermediate uptrend for the past seven weeks. This has resulted in a weak relative strength and a drop below 40.50 will result in the intermediate trend turning down. Traders can look for short positions on a drop below this level and must keep a stop at 42.90. Lower this stop as the stock moves lower. The relative strength line is already weak and the weekly MACD Histogram has exhibited a negative divergence indicating that the bulls are weak and the bear could get strong once an intermediate downtrend is established.

India Bulls Real Estate is in a weak intermediate rise and is facing a resistance at 275-278 level. A close below 267 will result in the intermediate trend turning down as the stock will head towards the support of 262. Below this level, the next support is at 247 and a weekly support is at 236. Below this level, the major uptrend will be threatened and we could see lower levels. Traders can look for short positions when the stock drops into an intermediate downtrend and look for profits at the supports given here.

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