Column

Sensex (19,966): The price action in recent days has affirmed the bullish view expressed during the past couple of weeks. The index is on course to move to the target zone of 21,500-22,000. There is a strong support at 19300-19400 and the possibilities of a rally to the target zone would be valid if the key trigger level of 18,880 is not breached.

While the undertone remains bullish, there are a few disconcerting factors that need to be taken note of, and the price action in the next few weeks would be critical in determining the longevity of the recent uptrend. The inability of the index to move convincingly past the 20,000-mark is the primary cause of concern.

The Sensex has been flirting with this level for a while, but is yet to overhaul it. As a result, there has been a series of negative divergence between the price action and key indicators such as the 14-day Relative Strength Index.

A gradual deterioration in momentum is also evident in frontline stocks like Bhel, Reliance Industries and Larsen & Toubro.

In this context, it is imperative for the index to stage a sharp rally this week to reassert the bullish context. Else, there is a strong case for a range-bound action or a gradual drift to lower levels of 18800-18900. Though there is nothing to suggest that the uptrend would be aborted at current levels, there are reasons to turn cautious in the present market scenario.

Nifty (5977.7): A bullish trend prevailed and the index posted a gain of 212 points for the week. Similar to the Sensex, the Nifty too has been indecisive around the psychological barrier of 6,000. A quick overhaul of this level would send a strong message that the bullish trend is gathering momentum.

The price patterns last week have reinforced the bullish view and the index is now poised for the next major move on the upside that would take it a step closer to the target zone of 6400-6500. Support for the Nifty is at 5750-5800 range. The uptrend and the ability of the index to move to the target zone would be under doubt if the index closes below 5590.

CNX IT Index (4711): A bullish trend prevailed and the index is on course to move to the short-term target zone of 5100-5200 mentioned last week. Software heavyweights could continue to attract market interest if the recent price patterns are any indication. A move past 5500 would indicate that the index is back on bullish track and could then move to 6550-6600. The bullish view would be negated on a close below 4250.

Key pivotals:

Sterlite Industries (Rs 1096): The stock ruled firm and has validated the bullish view featured last week. The share price is on course to hit the target zone of Rs 1250-1300. Investors may add this stock to the portfolio as it is one of the promising stocks from the metals space. Have a stop loss at Rs 1,020 for long positions. Investors with a long term perspective may settle for a slightly farther stop loss of Rs 1,000.

DLF (Rs 1011): A bullish trend prevailed and the stocked breezed through the target zone of Rs 975-980 mentioned in earlier weeks. This is one of the bullish stocks from the realty sector and holds a lot of promise from the long term perspective. The stock could head towards the next target zone of Rs 1125-1150. Have a stop loss at Rs 970 for long positions.

Wipro (Rs 503): The stock moved up sharply on Monday and has edged closer to the target zone of Rs 520-525 mentioned last week. The outlook remains bullish and a move to the next target of Rs 625-650 appears likely. Stop-loss for long positions may be placed at Rs 460.

Stock of the week:

Zensar Technologies (Rs 187): Anyone trying to grasp the basics of technical analysis need not look beyond the weekly price chart of this stock. The basic concepts such as support/resistance zone, importance of Fibonacci retracement levels and classic positive divergence between price action and indicators such as Relative Strength Index or MACD can be gleaned from the weekly price chart.

The stock bounced off the key support level of Rs 161 which coincides with a couple of peaks and troughs formed at this level a couple of years ago.

This level also marks the 61.8% Fibonacci retracement of the move from Rs 33.5 to the high of Rs 380. The bounce from this crucial support level and the pick-up in trading volumes this week indicates that the stock could seek higher levels. A move to Rs 245-250 appears likely. This view would be invalidated on a close below the stop loss level of Rs 166.

(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)