In the last week I had discussed about the weekly resistance of 17,200 for the Sensex and 5,100 for the Nifty. These levels are important resistance levels as indices have drifted lower towards their first supports of 16,622 for the Sensex and 4,920 for the Nifty. The Sensex dipped below these supports on an intra day while the Nifty is slightly above these supports. A close below these supports will confirm that the intermediate trend of the indices is down. This will mean that the Sensex will be heading towards the next supports of 16,130 and 15,470 and the Nifty will be heading towards the supports of 4,795 and 4,605.

The indices have already exhibited descending minor tops and a close below their earlier minor bottoms of 16,622 for the Sensex and 4,921 for the Nifty will confirm that the intermediate trends are down and the indices are headed towards the lower support levels. The equivalent target for the CNX Mid Cap index to drop into a fresh intermediate downtrend is at 6,482. If the indices are able to hold above these levels and continue to trade sideways, than the intermediate correction will be a sideways mode and once this correction is over, and the next intermediate uptrend starts, higher levels will be seen. On the other hand, if the intermediate correction gains momentum on the downside, lower levels towards the next support levels will be seen.

In the last week, majority of the indices ended in red as the Sensex lost 2.87% and was followed by the Nifty which lost 1.60%. The CNX Mid Cap index ended 1.11% higher while the BSE Small Cap index lost 2.83%. Among the sectors, the activity shifted to the defensive sectors as the BSE FMCG sector was the largest gainer ending the week with a gain of 6.15% and was followed by the BSE Consumer Durables sector which gained 5.61%. On the weaker side, the BSE Teck index was the largest loser ending 10.74% lower and was followed by the BSE Realty sector which lost 2.61%.

Unless the Sensex is able to close past the weekly resistance of 17,200 and the Nifty past 5,100, higher levels will not be seen by the indices. A close past these weekly resistances will result in the Sensex heading towards the next target of 19,145 and the Nifty towards 5,685. The slow rate of decline by the indices in the last week suggests that the major uptrend is intact and once the current intermediate downtrend is over, higher levels are likely to be seen.

The earlier intermediate bottom by the Sensex is at 14,684 and for the Nifty it is at 4,353. As long as the intermediate corrections ends above these levels and makes a higher intermediate bottom, the major uptrend remains intact. The equivalent level for the CNX Mid Cap index is at 5,634.

In the last week we have seen some sectors like the telecom sector, the tech sector, the auto sector and the cement sectors correcting while stocks in the FMCG sector and the metals improved. This resulted in the divergent trends in the sectors and the action by the indices was choppy. The stocks in the telecom sectors have dropped into a major downtrend and even though we may see a rally, investors must use the rally to liquidate these stocks. I will discuss some pivitols today.

Larsen & Toubro met with a resistance on the weekly chart at 1,720 and since that time, the stock has been drifting lower. The stock has already dropped below its 20 DMA and is near its earlier minor bottom of 1,621. A close below this level will confirm an intermediate downtrend indicating lower levels towards the next support of 1,596 and 1,542. As long as the support of 1,542 holds, the intermediate downtrend will be a technical correction within the major uptrend. Below the support of 1,542, the next support level for the stock is at 1,365. On the upper side, the stock has a resistance at 1,695 and 1,720.

ONGC traded sideways in the earlier intermediate uptrend by the indices and has started to improve now when the indices are correcting. The intermediate trend has turned up and some pivitols like this stock have been responsible for the slower rate of decline in the past two weeks. The stock is at the first resistance of 1,224 and a close past this level will result in the stock heading to the next resistance zone of 1,270 and 1,325. Traders can look for profits at these resistance levels. The relative strength line for the stock is neutral and slightly weak and hence investors must avoid the stock for the time being.

Hindustan Unilever is in an intermediate uptrend and like most of the FMCG stocks, it has been helping the indices from declining at a brisk rate. It is at the weekly resistance of 291 and will pause here before it heads towards the next resistance of 299. Traders can look for profits and use a minor correction in the coming week to add to the long positions. The trading volumes have fallen in the past two days suggesting less activity near the resistance. This means that the bulls are not strong enough to cross this resistance now and a minor decline is possible.

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