After making new highs in the last week, the indices paused at the rising channel. After taking a support at the rising gap the Sensex bounced back smartly as the bulls took over again, and the indices are headed higher before diwali. Usually, in the period before diwali and during diwali, we see profit taking as the intermediate trend is down. But as things stand now, we are headed for a bullish season as the bulls will greet diwali in style.

The intermediate uptrend which had started on August 17 remains up and the target for the Sensex and the Nifty to drop into a fresh intermediate downtrend are far away and are at 17,171 and 5,070 respectively. These levels will be raised after these indices move above Friday?s high and the new targets will be at 19,255 and 5,714 respectively. The equivalent level for the CNX Mid Cap index to drop into an intermediate downtrend will be at 7,215.

The earlier intermediate bottoms for the indices are far away and are at 13,779 and 4,002 respectively. As these levels are far away, the next intermediate decline will make a higher intermediate bottom and the bull-run will continue. The earlier intermediate bottom for the CNX Mid Cap index is also far away and is at 5,420.

The market breadth was bullish on all the up days, while on Thursday, the breadth was bearish due to profit taking. The trading volumes were high on Thursday, confirming profit taking, and unless we see four to five such big down days, the bull-run remains intact and the bulls must make hay while the sun shines. Investors and traders must be active in stocks where the action is and technical analysis is the best way to scan and find the best of stocks.

At these levels, we are seeing fewer stocks participating in the uptrend and this is quite natural. Investors and traders must look for sectors and stocks which are seeing strong volumes and stay invested in stocks which are exhibiting a strong money flow. In the last week, we have seen a rise in activity in banking stocks and these stocks are likely to perform well in the coming week. Traders and investors must concentrate on these stocks as many stocks from this sector are poised to breakout and move higher. With the oil prices zooming, this is one of the few sectors which will be least. Today, I will discuss a few stocks from this sector.

Corpoartion Bank

Corpoartion Bank saw a rise in activity in the last week, as the stock broke out of a nice base and went into a major uptrend. The relative strengthline for the stock is flat and has started to improve and will soon move higher, indicating that the stock is outperforming the indices. The weekly MACD Histogram for the stock is making new highs, indicating a positive momentum, and the stock will soon follow suit. Stay invested with a stop at 331 and trail the stop as the stock moves higher. Traders can use any minor correction or a pull back towards the support of 400 to pick up long positions in the stock. The only resistance level to the stock is at 507.80 and once the stock closes past this level, it will exhibit higher levels.

Dena Bank

Dena Bank went into a major uptrend and a new high territory since June 2007. Since that time, the stock has been outperforming the indices and most other PSU stocks. The money flow indicator for the stock is bullish, suggesting that the bulls are quite active in the stock as it has been witnessing a strong trading volume.

The strong up volume exhibited by the stock suggests higher levels and any pull back towards the support zone between 65/70 must be used to pick up long positions in the stock. Currently, the stop for the investors is at 50, and trail the stop higher as the stock moves up. Investors must continue to stay invested in bullish relative strength stocks.

State Bank of India

State Bank of India is the leader in the PSU banking sector and has been outperforming the indices for quite some time. The stock is in the new high territory and has been exhibiting a strong upward momentum. The weekly MACD histogram for the stock is making higher highs, indicating higher levels for the stock, and the weekly MACD is above its trigger line, indicating a bullish momentum. In the daily chart (not shown), the stock has broken out of the continuation formation suggesting that the stock is headed towards the 2,600 level very soon. Investors must stay invested and traders should trade in such stocks on the long side.

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