The indices pulled back from their weekly resistance of 5,313 for the Nifty and 17,804 for the Sensex. These are important resistance levels and unless these indices are able to register a strong close past these levels on a weekly basis, higher levels towards the next target of 19,450 for the Sensex and 5,767 for the Nifty will not seen soon.
In the last week, after seeing a strong rise in the first three days, the indices have been pulling back and are in a minor decline within the intermediate uptrend. As long as the current minor decline ends above 17,322 for the Sensex and 5,160 for the Nifty, the intermediate uptrend remains intact. The equivalent level for the CNX Mid Cap index is at 7,152. We will have a higher target for the intermediate downtrend once the current minor decline ends.
Supports to the Sensex exist at 17,210 and for the Nifty it is at 5,135. As long as the current minor decline ends above this level, the decline is just a technical correction within the intermediate uptrend. On the upper side, the weekly resistance levels are important hurdles which the indices will have to cross. A close past the weekly resistance of 17,804 for the Sensex and 5,313 for the Nifty will mean higher levels. Thus, if the current minor decline ends above the supports suggested here, the possibility of the indices breaking above the weekly resistance levels are higher.
On the weekly charts, the Sensex has a support at 16,755 and the Nifty at 4,984. These are important support levels. Any intermediate correction ending above these levels will mean that the major uptrend is intact and the bull run which has started in March 2009 continues. On the bearish side, the weekly MACD and momentum indicators continue to exhibit a negative divergence. This happens because the momentum on the upper side has been falling and only a strong close past the weekly resistance level will result in the weekly MACD giving a buy signal and negating the negative divergence.
In the last week, the indices ended flat as the Sensex gained 0.43% and the Nifty ended 0.84% higher. The activity in the mid cap and small cap stocks was more bullish as the CNX Mid Cap index gained 2.41% and the BSE Small Cap index gained 4.07%. Among the sectors, the BSE Realty sector was the largest gainer ending 5.65% higher and was followed by the BSE Metals index which gained 3.97%. On the weaker side, the CNX IT sector lost 3.62% and was followed by the BSE Auto index which ended 0.53% lower.
Tech stock along with auto stocks have witnessed profit taking in the last week as many stocks in these sectors have dropped into an intermediate downtrend. Once the current minor decline ends above the support levels suggested above, positions traders can again look for long positions in strong sectors and stocks. The cement sector still has some steam left after the rise in the past few weeks. I will take a look at some of these stocks today.
ACC remained weak between August and November, but after taking a support at the weekly support level, the stock has been in a strong intermediate rise. The stock has closed past the weekly resistance of 875 and is heading higher towards the next target of 970. A minor decline in the stock can be used by traders to look for long positions as long as the minor decline ends above 865. Only a drop below this level will mean more weakness. Thus, as long as any minor correction ends above 865, look for long positions for the next target of 970 or even higher.
UltraTech Cement. is also in a strong intermediate rise and has closed past both the weekly resistance of 925 and 954. The stock is headed higher towards the next target of 1,100 which is closer to its earlier major top. In the last week, the stock has seen a strong rise and a minor correction in the coming week must be used by traders to pick up long positions as the stock is headed higher. Only if the indices see a strong correction, the uptrend of the stock remains intact and the minor decline must be used to add to the long positions. The trading volumes in the past week have been quite strong resulting in a strong money flow.
Even though India Cement has been in an intermediate uptrend and has improved in the past few weeks, the stock is currently at the resistance of 128.90 and also the 30 WMA. Only a strong close above this level will mean higher levels towards the next target of 141. On the other hand, if India Cement drops below the weekly support of 120.60, lower levels will be seen. Only if any correction ends above the weekly support of 120.60, the stock will head higher towards the next target. As the relative strength line for the stock is weak, investors must stay away from the stock.
?For more details contact mayur_s@vsnl.com