The budget did not bring a big cheer to the stock market and even though there were few expectations, the budget was more of a non event and after a couple of days, it will not be talked about atleast by the market participants. The investors and traders will again start to focus on international markets from the coming week, as they have been doing so, and our markets will continue to react to international events.
The indices have been moving in a sideways triangle and have been staying within this triangle for the past month. They have now moved closer to the apex, as the volatility has been falling and a breakout or a breakdown from this sideways mode will result in the direction of the intermediate trend. The intermediate trend is currently sideways as the indices have been exhibiting ascending minor bottoms and descending minor tops.
The Sensex will have to move past 18,138 and the Nifty past 5,368 to get back into an intermediate uptrend. On the other hand, if these indices drop below 17,137 and 5,055 respectively, the intermediate downtrend will continue. The equivalent target for the CNX Mid Cap Index to go into a fresh intermediate uptrend is at 7,322.
The Sensex ended the week with a marginal gain of 1.32% and the Nifty gained 2.21%. Among the gainers, the BSE Healthcare sector was the best performer, ending 4.91% higher, and was followed by the BSE Auto sector, which gained 3.81%. On the weaker side, the BSE Consumer Durables ended 3.90% lower and was followed by the BSE Tech Index, which lost 1.54%.
The indices have been taking support at the 200 DMA in the past two weeks and though they have not been able to confirm an intermediate uptrend, they will do so quite soon, as everyday we see more stocks going into a fresh intermediate uptrend. The rate of rise or decline by the indices has reduced and so is the volatility. A breakout or a breakdown from the sideways triangle will result in a trend and a good trading opportunity for traders.
The earlier intermediate top for the Sensex and the Nifty are at 18,896 and 5,545 and the next intermediate uptrend must take the indices past these levels if the major uptrend has to be reinstated or the major trend has to be sideways. On the other hand, if the indices drop into a fresh intermediate downtrend, and below the lows made on January 22, the major trend will continue to remain down. Currently, short-term momentum indicators are exhibiting a positive divergence, indicating that the indices may follow suit and confirm an intermediate rally. With the finance minister having given some sops to the automobile sector, I will take a look at some of the two-wheeler stocks today.
Hero Honda
Hero Honda was an underperformer in the past two years as the relative strength line was declining and the stock was trading sideways between 605 and 808 since April 2006. The stock has now been witnessing a rise in activity, and if the current intermediate rise can take the stock past its earlier intermediate top of 786 in the current intermediate rise, then the major trend of the stock will turn up. The weekly MACD indicator has been above its trigger line, indicating that the momentum is on the upper side and the stock could confirm a major uptrend. The relative strength line has been exhibiting rising tops and bottoms, indicating that the stock has started to outperform the indices. Currently, take up long positions and if the stock confirms a major uptrend, convert this long position into investments.
Bajaj Auto was also an underperformer in the past two years and after making a major top in 2006, the stock has been trading sideways and was oscillating about its 30 WMA. The stock has exhibited rising minor bottoms and will confirm an intermediate uptrend once the stock closes past its earlier minor top of 2,436. The earlier intermediate top for the stock is at 2,508 and the stock will have to close past this level in the intermediate rise to confirm that the major trend has also turned up. The weekly MACD Histogram for the stock had made a lower bottom in the last intermediate decline, indicating that the stock will see selling pressure at higher levels and will test its recent bottoms in the next decline. Under these conditions, investors must stay away for the time being and must wait for some more positive formations before getting into the stock.
TVS Motors
TVS Motors went into an intermediate uptrend in the last week but the major trend of the stock is down as the stock has been exhibiting descending intermediate tops and bottoms. The relative strength line for the stock has been weak and is bearish, indicating that the stock is underperforming the indices. The weekly MACD Histogram suggests that the stock will exhibit lower levels in the next intermediate correction or will at least test the recent bottoms, and under these circumstances, investors must stay away from the stock.
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