The Budget was not liked by market participants and as a result the indices saw a strong decline in line with the majority of the stock markets around the world. The Sensex lost 9.45% and the Nifty ended 9.50% lower. Among the sectors, the BSE Realty sector was the largest loser ending 17.16% lower and was followed by the BSE Bankex, which lost 13.47%. The only place to hide were the FMCG sector, as the BSE FMCG sector was the only gainer, ending 4.15%. This suggests that traders and investors are again looking at defensive sectors as the frontline indices and the high beta stocks are in a strong decline. The other two sectors, which are witnessing a smaller decline, are the tech stocks and the health care sector.

The indices have made a bearish head and shoulder pattern on the charts and this suggest that the indices are headed lower in the current intermediate downtrend. The large gap created just after the election results between 12,219 and 13,479 by the Sensex is likely to be filled. The Sensex has a support at the 12,730, which is the 61.8% retracement level and the net support is at 11,845, which is the 50% retracement level. The equivalent levels for the Nifty are at 3,878 and 3,623 respectively.

After the announcement of the Budget on Monday, the indices are in a strong decline and the targets for the Sensex and the Nifty to get back into a fresh intermediate uptrend are far away and are at 15,098 for the Sensex and 4,480 for the Nifty. The equivalent level for the CNX Mid Cap index is at 5,597.55. These levels will be lowered after a minor rise is followed by a minor decline.

On the upper side, the Sensex has a resistance at 14,400 and the Nifty has a resistance at 4,282 and as long as any minor rise stays below this level, traders must use the rise to look for short positions. After such a strong decline in the last week, we may see a minor rise in the coming week, but position traders must avoid looking for long positions.

Since March, the indices had witnessed a strong rise as they closed past their earlier intermediate tops and are in a major uptrend. Most of the stocks also followed suit and are in a major uptrend. A higher intermediate bottom in the current intermediate decline will be a good opportunity for investors to look for long positions. This will take some more time and investors must wait for the formation of the intermediate bottom and than look for long positions in strong relative strength stocks and sectors.

Metal stocks look weak and are headed lower towards their next weekly supports. As suggested above, position traders and swing traders must use the next minor rise in the coming week to look for short positions. A few opportunities on the short side can be taken up in some of the stocks discussed below. Currently, the stops for the shorts are far away and a minor rise will lower these stops. Investors must wait for some more time before they look for long positions.

Tisco

Tisco is in an intermediate downtrend and with the weakness the base metals, we are seeing metal stocks drifting lower. Tisco has closed below its support of 367 and is headed towards the next support of 300. Use any pull back towards the resistance of 380/400 to look for short positions. As the major trend of the stock is up, investors must wait for the stock to exhibit higher intermediate bottom before looking for long positions. Currently, the intermediate trend is down. The stops for the short positions are far away and a minor rise followed by a minor decline will lower the stops.

SAIL

SAIL is also in an intermediate downtrend, but has been exhibiting higher strength as compared to Tisco. The rate of decline exhibited by the stock has been lower as compared to the indices and this has resulted in a bullish relative strength. The stock has a support at 142 and only a close below this level will result in the test of the next support at 126. On the other hand, if the stock is able to hold on to the first support of 142 and consolidate above this level, than it will be a better buy for investors as the stock is exhibiting a strong relative strength. Keep a watch at the relative strength lines and see if the support of 142 holds. Investors must always look to pick up strong relative strength stocks.

JSW Steel

JSW Steel has dropped below its first support of 532 and is headed lower towards the weekly support of 407. Like Tisco, the stock has been a strong intermediate downtrend and has been falling since the past two weeks. Thus, the stop for the short position is far away and swing traders must wait for a minor rise towards the resistance of 597 to look for short positions. This will lower the stop. Investors must wait for the current intermediate downtrend to end before looking for long positions.

For more details contact mayur_s@vsnl.com