The indices were in a run away mode as the Nifty zoomed past the 5,000 level on Thursday, but closed just below it as investors and traders looked for profits. The Sensex gained 2.93% and the Nifty ended 3.03%. Among the sectors, the BSE Auto sector was the largest gainer ending 9.50% higher and was followed by the BSE Metals index which gained 7.84. Only one sector ended with losses and it was the BSE Oil & Gas Sector which lost 1.07%. The BSE FMCG sector registered the lowest percentage gain ending 0.94% higher.
The intermediate uptrend which had started on the August 19, is still intact as the Sensex is moving closer to its first target of 17,200 and the Nifty towards its target of 5,100. These are the weekly resistance levels where we are likely to see more profit taking. The earlier intermediate bottom by the Sensex is at 14,684 and for the Nifty it is at 4,353.45.
As long as the next intermediate correction ends above these levels, the major uptrend remains intact. The equivalent level for the CNX Mid Cap index is at 5,634.40. The current intermediate rise is more than five weeks old and investors must wait for the next intermediate correction before looking for fresh positions. Traders must wait for a minor decline which will raise the stops which are currently far away.
On the weekly charts, the Sensex has a strong support at 14,840 and the Nifty has a support at 4,432. As long as these indices do not close below these levels on a weekly basis, the bull run continues. The indices are staying above an ascending trendline and only a strong close below this trendline will suggest weakness. As long as any correction ends above this ascending trendline, the bullish mode remains intact.
Once the Sensex and the Nifty close past the weekly targets of 17,200 and 5,100, they will be headed higher. A close past these levels on a weekly basis will result in these indices heading towards the next targets of 19,245 and 5,715 respectively.
The targets for the Sensex and the Nifty to drop into a fresh intermediate downtrend are at 16,119.95 and 4,786.25 respectively. The equivalent target for the CNX Mid Cap index to drop into a fresh intermediate downtrend is at 6,175.70. These levels are currently far away and a minor decline followed by a minor rise will raise these targets. On the daily charts, the supports to the Sensex are at 16,265 and 16,010 and the Nifty has supports at 4,841 and 4,761. These are dynamic support levels and will move higher as these indices move higher.
We are moving closer to Diwali which is usually weak for the indices. October has been statically subdued and hence fresh long positions by investors must be avoided as the current intermediate uptrend is going on for more than five weeks. Any fresh positions must be by short term and swing traders. Today I will look at stocks from different sectors which could move higher as we are currently seeing bullish activity in select stocks.
Tech stocks have been leaders in the current bull run and any bullish activity in this sector is a good opportunity for traders as well as investors. In the past two trading sessions, the stock has seen a smart built up in volumes and after going through a nice correction from mid August, the stock went into a fresh intermediate uptrend in the last week. As the stock has made a lower minor bottom in the last week, position traders and investors must wait for a pull back towards the support of 34.50 to look for long positions. The relative strength line for the stock is bullish indicating that the stock is outperforming the indices.
Dr. Reddy is one of the few stocks which has closed past the 2008 major top and is closer to the all time high of 889 attained in 2006. The stock has witnessed a strong rise in trading volume in the past week suggesting that the bulls have become very active in the stock. The stock has a resistance at 916 and above this level, the stock will not any overhead resistance. Use a minor decline or a pull back towards the support of 810 in the coming week to look for long positions. The relative strength line for the stock is bullish.
Grasim Inds, along with many cement stocks have been witnessing a bullish activity in the last week. These stocks have not performed in the current intermediate rise and have now started to go into a fresh intermediate uptrend. Grasim Inds. went into a fresh intermediate uptrend on Thursday and any pull back towards the support at 2,700 can be used by swing traders and investors to look for long positions. The resistance to the stock is at 3,050, where traders can look for profits in this long position.
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