The intermediate uptrend continued as indices moved closer to their 61.8% retracement level and important resistance levels. The Sensex has a resistance at 9,800 and the Nifty at 2,975 and both these indices are very close to these levels. A weekly close past these levels could take the Sensex and the Nifty towards the next target of 10,100 and 3,150 respectively. On the other hand, if these indices are not able to move past the first resistance level, then we could see a start of an intermediate correction. The indices are moving in a large sideways triangle and the upper descending trendline will act as a resistance to the current rally.

The targets for the Sensex and the Nifty to drop into a fresh intermediate downtrend are at 9,445 and 2,886 respectively. The equivalent target for the CNX Mid Cap index to drop into an intermediate downtrend is at 3,257.

The volume action during the current intermediate rise has been poor and we are not seeing a strong rise in volume on up days. Also, on down days, the trading volumes have been higher than volumes on up days.

This means that the current intermediate rise is a rally within the bear market. In the last week, I had suggested that the volume action on up days must improve if the current intermediate rise has to take the indices above the earlier intermediate tops to confirm a major uptrend. But till now, we are not seeing a bullish volume action and this would suggest that the current intermediate rise is just a rally.

The earlier intermediate tops for the Sensex and the Nifty are at 10,470 and 3,147.20 respectively. These indices will have to close past these levels in the current intermediate rise to suggest that the major trend has turned up. The equivalent level for the CNX Mid Cap index is at 3,978.

In the last week, the Sensex gained 3.59% and the Nifty gained 3.70%. Among the sectors, the BSE Reality sector was the largest gainer ending 12.55% higher and was followed by the BSE Capital Goods sector which gained 7.88%. On the weaker side, the BSE IT sector was the largest loser ending 1.38% lower and was followed by the BSE FMCG sector which lost 0.49%.

There are very few stocks where the current intermediate rise has been a slow tedious up move. This has made life for position traders difficult. Only day traders and short-term traders have been benefiting from the current rally. In the last week, Fertiliser stocks have become active. One of the reasons could be the activity ahead of the vote on account. Today, I will take a look at some stocks from this sector.

GNFC

GNFC has been making a nice basing pattern since October 2008 and a close past 66 will mean higher levels for the stock. It will also mean a close past the high made above the rally made in Diwali. However, as the stock is trading well below its 30 WMA, higher levels by the stock will receive resistance. The next important resistance level for the stock is at 72 and only a close past this level on a weekly basis could mean higher levels. Thus, the current intermediate rise must be used by traders to look for profits at this resistance level. Also, the relative strength line for the stock is weak and will require some more time to improve indicating that the current basing pattern may not be a bottoming process for the stock.

Chambal Fertiliser

Chambal Fertiliser is also making a basing pattern, but unfortunately this pattern is again being formed well below the falling 30 WMA. For a stock to move higher into a bullish zone, basing pattern must be formed very close to the 30 WMA and a breakout must usually appear just above this long-term moving average. In case of Chambal Fert, the nice pattern is being formed well below its 30 WMA and again the relative strength line remains weak. Thus, the technical conditions suggest that the intermediate rise is just a rally and must be treated as a rise within the major downtrend. Investors must wait for more confirmations before getting into the stock. However, they can continue to hold on to their trading positions.

Nagarjuna Fertiliser

Nagarjuna Fertiliser is in an intermediate uptrend and is at the upper end of the basing pattern. A close past 19 will mean that the stock has completed its basing and is ready to move higher. Like the other two stocks discussed, Nagarjun Fert. is also trading well below its falling 30 WMA and the current basing pattern has a less technical strength and must be used for trading purposes only. The next important resistance to the stock is at 22.45 where traders can look for profits in their long positions.

?For more details contact mayur_s@vsnl.com