The indices ended higher for the sixth successive week as the Sensex and the Nifty are facing a resistance at their 200 DMA. This long term moving average usually resists the indices and the stocks, which move towards it from lows and acts as a support for intermediate correction in a bull market. The Sensex and the Nifty have already closed past their October highs, indicating that the major trend is up, but the current intermediate rise could be facing a strong resistance at the 200 DMA and we could see an intermediate correction soon.

The targets for the Sensex and the Nifty to drop into a fresh intermediate downtrend are far away and are at 9,521 and 2,962 respectively. These levels will be raised after a minor decline followed by a minor rise. The equivalent level for the CNX Mid Cap index to drop into an intermediate downtrend is at 3,248.

The Sensex has supports at 10,100, 9,707 and 9,315 levels. These are the 38.2%, 50.0% and 61.8% retracement levels for the current intermediate rise. The next intermediate correction must end at one of these levels and make a higher intermediate bottom to confirm that the major trend has turned up. The Nifty has supports at 3,140, 3,025 and 2,910 levels.

The Sensex gained 2.03% in the last week and the Nifty ended 1.27% higher. Among the sectors, the BSE Bankex was the largest gainer, ending 9.53% higher and was followed by the BSE Capital Goods sector which gained 6.39%. On the weaker side, the BSE Consumer Durable index ended 6.01% lower and was followed by the BSE IT sector, which lost 1.51%.

A majority of the stocks in the past six weeks have seen a smart run up and are currently facing a resistance at their weekly resistance levels. Few stocks, like the banking stocks, have still some head room left and could be seeing some more upside in the coming week. Now, as the current intermediate rise is the first leg in the major uptrend, investors must wait for the next intermediate correction and allow the indices to form a higher intermediate bottom before looking for long positions. Currently, the stocks and the indices are overbought and the stops are also far away. Moreover, in the past two trading sessions we have been witnessing a lot of intra day volatility. Some metal stocks may have already started a correction. Many have made a nice basing formation and investors must look for long positions towards the end of the next intermediate correction. I will discuss some of these stocks today.

JSW Steel

JSW Steel has made a nice basing formation and has moved past its earlier intermediate top and is in a major uptrend. As the stock has seen a strong decline in the last bear market, the stock is trading below its falling 30 WMA and this moving average has resisted the current intermediate rise in the stock. The stock has support at 310 and 254 on the daily chart and on the weekly chart the stock has a support at 226. As long as the next intermediate correction ends above 226, the bullish trend in the stock remains intact and investors must look for long positions once the stock makes a higher intermediate bottom above the weekly support.

Jindal Stainless

Jindal Stainless has a similar formation as compared to JSW Steel. The major trend of the stock has turned up, but after the strong decline in the last year, the stock is trading below the 30 WMA, which is acting as a resistance to the intermediate rise. The daily and the weekly trend of the stock are up and the stock has a support at 49.50 and 42.0 on the daily charts. On the weekly chart, the stock has a support at 37.0 and as long as this support is held in the next intermediate correction, the weekly indicators remain bullish and long positions can be taken up after the next intermediate correction. Investors must look for stocks, which have made a nice basing formation.

Sterlite Industries

Sterlite Industries has been witnessing a bullish relative strength in the current intermediate rise as the stock has closed past its earlier intermediate top of 338.85. Metals are facing some resistance in the past few days and could start an intermediate correction. The stock has a support at the 360 level on the daily chart and 290 level on the weekly chart. The weekly support is important and as long as the stock holds this support in the next intermediate correction, investors must look to pick up long positions in stock towards the end of the next intermediate correction.

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