The Sensex and the Nifty went into an intermediate uptrend on Friday, by exhibiting ascending minor tops and bottoms, but on a larger scale, these indices have been staying in a descending channel. As long as these indices stay within the descending channel, the corrective mode of these indices will continue. A breakout from the descending channel will result in a trending mode. The mid-cap stocks continue to outperform the indices, as the CNX Mid Cap index continues to remain in an intermediate uptrend, indicating that the bullish activity remains in the mid-cap stocks, while the frontline pivitols have been taking a breather. Under these circumstances, traders and investors must currently concentrate on the mid-cap stocks.
The Sensex has a strong resistance at the 20,000 level and the Nifty at 6,000, and these indices will have to close past these levels, to confirm an uptrend and higher levels for these indices. The CNX Mid Cap index is already in an intermediate uptrend, and the targets for this index to drop into an intermediate downtrend is at 7,367. In the last week, the Sensex gained 2.71% and the Nifty ended 2.75%. The CNX Mid Cap index continued to outperform the indices and ended 4.83% higher.
Among the sectors, the BSE Reality index bounced back smartly and gained 8.62%, and was followed by the BSE Metals index, which gained 6.85%. On the weaker side, the BSE Health Care index registered the least gains, ending 0.31% higher, and was followed by BSE Power index, which gained 1.44%.
The market breadth was subdued on the days the indices dropped, but improved on up days. The trading volumes were less than the 50 days average on most of the trading days, as we have seen only two days of distribution in the past few weeks, and this suggests that there are no signs of any major top forming. Only if we see scores of distribution days, then only must investors start looking for booking profits. Till such time, look for sectors or stocks, which have completed their correction, and get into these stocks.
The earlier intermediate bottoms for the Sensex and the Nifty are far away, and are at 13,779 and 4,002 respectively. The equivalent level for the CNX Mid Cap index is at 5,420. As these levels are quite far away, the next intermediate decline is not likely to drop below these levels, and hence the major uptrend will remain intact.
There is a rise in activity in tech stocks, and as most of the stocks are in a major downtrend, there are a few opportunities for position traders in this sector. Even investors can look at these stocks with a medium term perspective.
Like most of the frontline tech stocks, TCS has been an underperformer in the current year, as the stock has been drifting lower, while the indices have been making new highs. This has resulted in the relative strength line moving down and exhibiting descending minor tops and bottoms. The stock has been staying below its 30 WMA, and hence the current intermediate rise is just a trading opportunity on the long side. The earlier intermediate top for the stock is far away and is at 1151, and only if the current intermediate rise can close past this level, then the major trend of the stock will turn up. The relative strength line for the stock will take a while to improve, and under these conditions, investors and traders can look for position trade to get in for a target around the 30 WMA.
i-Flex
i-Flex went into an intermediate uptrend when the stock moved past its earlier minor top of 1,485. The stock is also in a major downtrend, as it has been exhibiting descending intermediate tops and bottoms. The short-term money flow indicator has signaled a buy, indicating an opportunity for position traders.
As the major trend of the stock is down, investors must pick up long positions in the stock with a medium term perspective. The stock is still below its falling 30 WMA and this moving average will be the first hurdle to the current intermediate rise, and traders and investors must look for profits near this long term average. Even if the major trend of the stock is turning up, it will take a while before we can start investing in the stock.
Satyam Computer
Satyam Computers is in a major sideways trend, as the stock has been moving between 400 on the lower side and 525 on the upper side. This sideways move by the stock has been seen since last October, and as the indices were moving higher, the relative strength line for the stock has been weakening. A breakout from this sideways zone on the upper side, that is above 525, will result in the major trend of the stock turning up, while a fall below 400 will mean that the major trend is down.
However, again the stock has taken a support above the 400 level and is headed towards the next resistance of 490 before testing 525. Again, investors and traders can take up the position call.
For more details contact mayur_s@vsnl.com