Sensex seen cruising towards 15700

Sensex (14656.7): Price action was in line with expectations and the trend turned bullish after a brief corrective phase. The index dropped to the support zone of 13600-13700 and recovered ground subsequently. The move confirms the view that a bottom of at least medium-term significance has been established at the recent low of 12514.

The short-term outlook remains bullish and a move to 15500-15700 is the preferred view. The bullish view would be intact as long as the bearish trigger level of 13000 is not breached. Investors may accumulate fundamentally sound stocks on weakness, especially from banking and capital goods sector.

It would be prudent to have a portion of fundamentally sound companies as core holdings and a portion may be used to trade in and out. This approach would be useful when the market is in a bottom-building and consolidation phase and the trading portion of the portfolio could be used to reduce the average cost of holding of core holding.

Apart from banking and capital goods, fertiliser and power are other sectors that investors may take exposures to. Tata Chemicals, Nagarjuna Fertiliser, Tata Power, NTPC and Neyveli Lignite appear promising. Long-term investors may build exposures in these stocks in a staggered manner.

Nifty (4413.55): The trend turned bullish after a brief corrective phase. The index turned around at the support zone of 4150-4175 mentioned last week. After touching a low of 4159, the trend turned bullish since Tuesday. The short-term outlook is bullish and the index is on course to hit the target zone of 4700-4750 mentioned last week.

The bullish view would be intact as long as the bearish trigger level of 4000 is not breached. Investors may consider long positions on weakness with a stop loss at 4000. A convincing move past 4750 could push the index beyond the 5000 mark.

CNX Bank Index (5962): The index has staged a sharp recovery in the recent weeks and has played a key role in bolstering the benchmark indices. The recent price pattern and momentum indicate that there is still a lot of steam and the index could move to 7200-7300. This view would be invalidated on a close below 5100.  Stocks such as State Bank of India, Bank of Baroda, Bank of India, PNB, HDFC and LIC Housing appear promising from the banking and financial services segment. Investors may use market weakness to buy these.

Key pivotals:
State Bank of India (Rs 1,530.3): This is one of the more promising stocks from the banking sector. The outlook is positive and a move to Rs 1,750-1,800 appears likely. The bullish view would be negated only on a close below the swing low of Rs 1,120. Investors may accumulate this stock on weakness with an initial target of Rs 1,750. A move past Rs 1,850 could push the stock to Rs 2,050-2,100. Stop loss for all long positions may be placed at Rs 1,120.

NTPC (Rs 177): Along with Neyveli Lignite, this is another stock that appears promising from the power sector. The short-term outlook is bullish and the stock could move to the immediate resistance zone at Rs 200-205. Long positions may be considered on weakness with a stop loss at Rs 167 on a daily closing basis. A move past Rs 205 could push the stock to the next resistance zone at Rs 220-222. Take partial profits at Rs 200-205 and a trailing stop loss may be used in the event of a move past Rs 205.

Reliance Industries (Rs 2,300): The trend turned bullish after a brief downward corrective phase. The stock dropped to the support zone of Rs 2,040-2,060 and reversed direction as anticipated last week. The recent price action confirms the earlier bullish view and the stock could move to Rs 2,650-2,700. Long positions may be considered with a stop loss at Rs 2,080.

Stock of the week:
MRPL (Rs 69.6): After a steady downward move since December 2007, the stock appears to have bottomed out at the recent low of Rs 40. The subsequent move from this low suggests that the next segment of the uptrend is underway. The stock could move to Rs 82-85 in the short term.

Long positions may be considered with a stop loss at Rs 62 on a daily closing basis.
A drop below Rs 62 would delay the progress towards the initial target zone of Rs 82-85; it would not negate the bullish view. Only a close below Rs 55 would negate the positive view.

Note: The analysis and views expressed in this column are based on the technical analysis of historical share price action. There is a risk of loss in trading. Views and targets are arrived at by using the Elliott Wave Theory and Point & Figure technique. The author does not have investment exposure in the stocks discussed above. Comments and feedback may be sent to bkrish16@gmail.com.