The indices dipped lower for the second week into the important event date, which was on Thursday ending a reaction cycle, which had started on May 5. The intermediate trend is still down and the Sensex and the Nifty will have to move past 17,497 and 5,167.40 for the intermediate trend to turn up. These values will be lowered after a minor rise is followed by a minor decline. The equivalent level for the CNX Mid Cap index to get back into an intermediate uptrend is at 6,973.40.

The indices had made a lower intermediate bottom on May 5 with a Sensex high of 17,735.70. The Nifty has made a lower intermediate bottom at 5,298.85. As the indices have been making descending intermediate tops and bottoms, the major trend is down and the first sign of a start of a bull-run would be if these indices make higher intermediate bottoms. The earlier intermediate bottom for the Sensex is at 14,677 and for the Nifty it is at 4,468. A higher intermediate bottom will be the first sign of a start of a major uptrend and we will keep a close watch at the indices in the current intermediate decline. Also, we will keep a close watch at the volume action if a new intermediate uptrend starts, as the volume action and the money flow must turn positive for a major uptrend to start.

In the last week, some bullish action was seen in the tech stocks due to the weakening of the rupee against the dollar. Activity was bullish in pharma stocks and some defensive FMCG stocks. The Sensex ended 1.41% lower and was followed by the Nifty, which lost 1.55%. On the bullish side, the CNX IT index was the largest gainer ending 6.98% higher and was followed by the BSE Healthcare index, which gained 3.95%. On the weaker side, the BSE Power index lost 8.32% and was followed by the BSE Reality sector, which lost 6.68%.

The Sensex has supports at 16,100 and a strong support at 15,300-15,500. As long as these supports are held and the Sensex makes an intermediate bottom above 14,677, then we have a possibility of a start of a major uptrend. The Nifty has supports at 4,800 and 4,628 and we will keep a watch at these support levels in the coming weeks.

What we are seeing now is a few sectors like tech stocks, health care, and FMCG stocks in an intermediate uptrend, while a few rate-sensitive stocks are in a strong downtrend. On Friday we have seen strong bullish activity in steel stocks and if more sectors bottom out, we could see a start of a fresh intermediate uptrend after the indices make a higher intermediate bottom.

Today I will take a look at a few steel stocks, which are currently looking interesting. Investors can look for small trading positions as of now and if the indices go for a higher intermediate bottom, they can shift these positions to their portfolios.

Bhushan Steel

Bhushan Steel made a double bottom formation and has gone into a major uptrend by closing past its earlier intermediate top with strong volumes. The strong volumes on the breakout suggest that the bulls have become quite active in the stock and the stock is headed higher towards its 30 WMA and towards the next important resistance of 1095.

As the stock is currently trading below its 30 WMA, this long-term moving average will act as a resistance to the intermediate rise. The stock has a strong support at 850 and any pull back towards this support must be used by investors and traders to add to the long positions.

Sesa Goa

Sesa Goa is one of the few stocks which is very close to its 52-week new high and a close past 4,390 will take the stock into a new high territory. The stock is in a major uptrend and has been one of the very few stocks, which made a new high even as the indices were correcting. The relative strength line for the stock is very strong and the weekly MACD for the stock is above its trigger line, indicating that the momentum is on the upper side. This is one of the strongest stocks in the metals space and investors must liquidate some of their weak holding and pick up long positions in this stock. A move past 4,390 will mean higher levels for the stock and a bullish trading opportunity.

Welspun Gujarat

Welspun Gujarat is taking a support at the rising 30 WMA and has gone into a fresh intermediate uptrend after making a ?V? bottom three days back. The stock has closed past its earlier minor top and has now made a higher intermediate bottom. The stock will have to move past its earlier intermediate top of 457 in the current intermediate rise to confirm a major uptrend. Investors must pick up long positions in the next minor correction and if the stock is able to move past 457 in the next intermediate rise, than they must convert the trading position to investments. On the other hand, if the stock is unable to cross this top, than we will liquidate the long positions taking small trading profits.

For more details contact mayur_s@vsnl.com