Column

Sensex (20030.83): The price action during the week was lacklustre and the index remained confined to a trading range. The bullish trend is yet to reassert itself and the occurrence of a bearish “Doji Star” pattern in the weekly chart does not present a bullish case either.

On the positive side, the index has not seen sharp sell-off and is holding comfortably above the bearish trigger level of 18,880. The long-term bullish trend would be intact as long as this trigger level is not breached.

Though the sluggish price action over the past few weeks would qualify as a correction/consolidation to the prior rally, it is imperative for the index to stage a quick and sharp move up and also hold above the trigger level of 18,880. Short-term support is at the 19,500-19,600 range.

Though recent price patterns do not effuse bullish fervour, there no signs of outright trend reversal as yet. As observed in earlier weeks, a move to the target zone of 21,500-22,000 remains the preferred view. A quick and sharp fall below 18,880 is required to nullify the possibility of a rally to this target zone.

Nifty (6047.7): The price pattern in this index was no different from that of Sensex. After a sharp uptrend in the early part of the week, the index surrendered the gains on Thursday. The index has strong support at the 5,850-5,880 range. While a close below 5,850 would be an early sign of weakness, the long-term bullish trend would be invalidated on a close below 5,590.

The immediate target zone for the Nifty is at 6,450-6,500. This zone represents a confluence target zone based on Point and Figure tools and Fibonacci projection zone. This is a high probability target-cum-resistance zone and a quick overhaul of this range is a prerequisite for the continuation of the long-term uptrend.

CNX IT Index (4570): The index is in a short-term corrective phase to the earlier rally from 4,141 to the recent high of 4,763. This corrective phase is not over as yet and the index could drop to the immediate support at the 4,440-4,460 range.

The next leg of the uptrend would resume on the completion of this corrective phase. The medium-term outlook for the index remains bullish and a move to 5,100-5,200 is the favoured view. The bullish view would be negated on a close below 4,250.

Key pivotals:

Cairn India (Rs 226): This stock has been included in the Nifty recently. The short-term outlook is bullish and a move to Rs 245-250 appears likely. This view would be negated on a close below Rs 209. Have a stop loss at Rs 226 for long positions. Fresh exposures may be considered on weakness with the same stop loss. A close below Rs 200 would have medium-term bearish implications.

Dr Reddy’s Labs (Rs 718): After months of underperformance, stocks from the healthcare space staged a remarkable comeback during the week gone by. The BSE Health Care index has seen bullish breakout and could head to 4,900-5,000 levels.

After a sustained contraction in volatility, Dr Reddy’s is in the midst of a large expansion in volatility and this could result in a sharp and sustained upward move in the near term. The short-term target is Rs 750-760 and the stock appears to have the potential to breeze past the recent high of Rs 877.

BHEL (Rs 2,561): The short term outlook is bearish and the stock could test the immediate support at the Rs 2,400-2,430 range. A close below Rs 2,400 could pave the way for a drop to more crucial support of Rs 2,100-2,200. Going by recent price patterns, a test of the Rs 2,100-2,200 is the preferred view. Only a close above Rs 2,761 would reinstate bullishness.

Stock of the week:

Cholamandalam DBS (Rs 310): This is one of the star performers over the past few days. The stock is in a long-term bullish trend and could move to Rs 475-500 in the long term. In the short-term, there is a case for the stock to get into a corrective phase. The first support is at Rs 285-290 and major support is at Rs 260-270.Price weakness may be used to take fresh exposures. Stop loss for long positions may be placed at Rs 235.

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 nothave investment exposure in the stocks discussed above.

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