The indices ended marginally lower in the last week in line with the US markets as the Sensex lost 0.29% and the Nifty ended 0.34% lower. Among the sectors, investors were seen shifting to the defensives as the BSE Healthcare sector was the largest gainer ending 7.11% higher and was followed by the BSE FMCG sector which ended 1.74% higher. On the weaker side, the BSE Metals index was the largest loser ending 3.87% lower and was followed by the BSE IT sector which lost 3.13%.
In the last week the Sensex took a support at the gap created by the Sensex between 16,477 and 16,498. As long as the Sensex stays above this gap, the intermediate uptrend is intact. The targets for the Sensex and the Nifty to drop into an intermediate downtrend are far away and are at 16,119 and 4,786 respectively. A minor decline was seen in the past three trading sessions and the new targets will be raised to the level where this minor decline will end. The equivalent target for the CNX Mid Cap index is at 6,477.
The indices have been in an intermediate uptrend since the past six weeks and have been rising since the 19th. August. Weaker relative strength stocks which have not participated in the current intermediate rise have been seen moving higher in the last week. This usually happens towards the fag end of the intermediate uptrend, suggesting an intermediate correction could be seen soon. Also, October has been traditionally a weak month for the stock markets and as we approach October, traders must be careful and must look for profits in the long positions held and must tighten their stops for the balance long positions.
The earlier intermediate bottom for the Sensex was at 14,684 and for the Nifty it was at 4,353. As long as the next intermediate correction ends above this level, the major uptrend remains intact. The equivalent level for the CNX Mid Cap index to drop into a major downtrend is at 5,434.
On the daily chart, the Sensex has a support at 16,218 and the Nifty has a support at 4,824 and as long as these indices stay above these levels, the intermediate uptrend remains intact. A close below these levels will result in the Sensex heading towards the next support of 15,277 and the Nifty towards 4,553. Below these levels, on the weekly charts, the Sensex has a support at 15,080 and the Nifty has a support at 4,500 level.
As the current intermediate trend has been up since the past six weeks, investors must wait for the next intermediate correction before looking for any fresh positions. Under these conditions, I will take a look at some of the pivotals as they will give us an idea of how the indices are going to perform in the coming few weeks.
Relaince Inds has dropped into an intermediate downtrend in the last week, but the stock took the support at the 20 DMA and has bounced back on Friday. The 20 DMA is at 2,080 and a close below this level will result in Reliance Inds. drifting lower to the next support of 1,931. On the weekly charts, the stock has a support at 2,058 and a close below this level will be bearish and will result in the stock drifting lower to the next support of 1,797. The relative strength line for the stock is neutral and will turn weak if the stock drops below these supports. On the upper side, the resistances to the stock are at 2,230 and 2,320 respectively.
Tata Steel has also dropped into an intermediate downtrend in the last week and after testing its weekly resistance and target of 540, the stock has been declining and is closer to its first support of 456. Below this level, the stock has a support at 472. Commodity stocks have started to decline in line with the weakness of commodities in the last week. The weekly MACD Histogram has exhibited a bearish divergence suggesting more weakness can be seen in the current intermediate decline. The weakness in the commodities could result in the commodity stocks falling here and this could result in the weakness in the indices and a possibility of an intermediate correction.
Infosys is the strongest of the pivitols which I have been discussing today and has reacted ahead of the results after facing a resistance at its earlier major top of 2,415. The major trend of the stock is up and as the stock has closed below the first support of 2,250, the intermediate trend will be down. The earlier minor bottom for the stock is at 2,177 and a close below this level will confirm the same or if the stock exhibits a lower minor top in the coming week, the intermediate downtrend will be confirmed. The stock has a support at 2,095 and 1,930 where the current intermediate downtrend can end. Thus, as more pivitols drop into an intermediate downtrend, it is quite likely that the indices could follow suit.
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