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Positional traders are advised to wait until the current uncertainty is resolved

Sensex (17349.1): The trend during the last week was bearish with the index registering a 766-point fall. The possibility of a rally to 18800-19000 mentioned last week has not been negated as the support level at 17100-17250 zone is not yet breached. Besides, the daily trend is still bullish which enhances the odds of a rally to the resistance zone.

A decisive breach of 16800 would negate the chances of the anticipated pull-back rally and would confirm that the index is on it way to retest the major support zone at 15300-15500. The price action this week could provide more clues about the likely direction of the next major move.

As observed in earlier weeks, a retest of the lows recorded last month is the preferred view. The only uncertainty is, if this move would happen straightaway or after a rally to the resistance zone mentioned above.

Considering that the daily trend is still bullish and the index is in the weekly oversold region, there is a case for a short-term bounce. Going short at current levels may be avoided. Short positions may be considered with tight stop loss if the index stalls at the immediate resistance zone of 17650-17800.

It would be a safer strategy to assess the behaviour of the index at the crucial support zone at 17100-17250. Long positions may be favoured if the index finds support at this range and when upward momentum is apparent.

Given the nervousness, uncertainty and relatively low trading volumes, the price action would remain choppy as witnessed in recent weeks. The market environment is conducive for scalpers and short-term traders. Positional traders and investors may wait until the current market uncertainty is resolved.

Nifty (5095): As observed last week, the market has to go through an extensive period of churning and the retest of the lows at 4450-4600 would occur after a short-term spike. The immediate support is at 5010-5030 range. The index could stage a rally if this range is not decisively breached.

A short-term rally to 5580-5630, followed by a decline to 4450-4600 is the preferred view. The price movement this week is likely to provide clarity on the next major move. Traders may try to buy at support levels with tight stop loss as the daily trend has not turned bearish.

CNX Midcap Index (7182.5): After a sharp rally on Monday, the index was confined to a trading range rest of the week. As observed last week, the short-term outlook is bullish and a move to 7500-7650 is the preferred view. This view would be negated on a close below 6750.

Key pivotals:
Bhel (Rs 2059): After moving to a high of Rs 2,925 in November, the stock has been in a major downtrend. The recent rebound off the support level at Rs 1,850 indicates that the downtrend is complete and the stock could seek higher levels. The stock could move to the immediate resistance level at Rs 2,200-2,220. A close past Rs 2,220 could push the stock to Rs 2,350-2,400. Stop loss for long positions may be placed at Rs 2,020 on a daily closing basis.

State Bank of India (Rs 2115): The recent downtrend is likely to be arrested soon. The stock could soon see a short-term rally to Rs 2,350-2,375. The bullish view would be invalided on a close below Rs 2,004. Long positions may be considered with an initial stop loss at Rs 2070 on daily closing basis. Fresh long positions may be considered on weakness with a revised stop loss of Rs 2,003, if the first stop loss at Rs 2,070 is breached.

Unitech (Rs 369): The short term trend is bullish and a move to Rs 400-405 appears likely. A close below Rs 349 is required to negate the short-term bullish view. Long positions may be considered on weakness with a stop loss at Rs 349 on daily closing basis. A trailing stop loss may be used use in the event of a rally past Rs 405.

Stock of the week:
Union Bank (Rs 188): The recent downward move appears to have been completed at the Friday’s low of Rs 182.6. The short-term trend is bullish and a move to Rs 210-215 appears likely in the near term. Stop loss for long positions may be placed at Rs 179.Long positions may be considered at prevailing levels and on weakness with a stop loss at Rs 179. A trailing stop loss may be used in the event of a move past the target zone.

(Note: The analysis and views expressed in this column are based on the technical anlysis 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