Column

Sensex (15348.63): Just when it appeared that the index was getting into a trending phase, a bout of selling pressure pegged it back into a trading zone.

Though the anticipated short-term uptrend did not materialise, the inability to clear even the initial resistance level of 16,660 sent a clear signal that bearish forces were in control.

The inability to cross this resistance level, which was also the 34-day exponential moving average, and the subsequent breach of the stop-loss-cum-support zone of 15,600, has essentially negated the short-term bullish view. The recent price action has resulted in a drop in volatility and the index has been confined to a broad trading zone in recent weeks.

Considering the drop in volatility, the index appears to be bracing for a sharp trending move. Though the anticipated move is likely to be on the downside, it would be prudent to wait for the price action to indicate the direction of the next major trending move. A close above 16,660 would indicate that the thrusting moving would be on the upside; a close below 15,200 would trigger a sharp slide.

As the index is oversold in higher timeframes, the recent choppiness could continue for a while and the anticipated downside breakout may get delayed. As observed in earlier weeks, an eventual test of 13,400-13,800 remains the preferred view. This would get negated only on a close above 18,350.

The immediate resistance is at 15,800-16,000 and there is a minor support zone at 15,000-15,150. A drop below 15,200 would be an early sign of continuation of the bearish trend; a close below 14,670 would lend momentum to the fall.

With corporate earnings season underway, the recent choppy price action is likely to continue and investors need to tread with caution. A tight leash over risk and adherence to a trading plan is required to tide over such a market condition. Once the market gets into a trending mode, things would get far simpler, as the investor has to buy on dips in an uptrend and sell rallies in downtrend.

Nifty (4656): Though the price action in the previous week suggested that the bullish forces managed to take some initiative, the situation turned completely different during the just-concluded week. The sharp slide on Monday and the inability to hold on to intra-day gains during the week suggested that the bulls were not in control.

The failure to clear the first resistance level of 5,000 was another factor that indicated that the bears had the upper hand. The slide on Friday indicates that the index is on the verge of continuing a strong downward trending move. Though there is no confirmation of this as yet, a close below 4,430 would indicate that the index is on course to hit the support zone of 4,000-4,100 mentioned in earlier weeks.

Until such time, the index trades below 5,200, a test of the 4,000-4,100 would be the preferred view. Though it might take time for the index to drop to this target zone, long-term charts indicate a strong possibility of the occurrence of this event. Short-term resistance is at 5,000 and interim support at 4,540.

CNX Bank Index (6545): The index was unable to move past the resistance zone at 7,350-7,450 mentioned last week. The outlook remains bearish and a drop to 4,500-4,600 remains the preferred view.

Similar to frontline indices, the bank index, too, appears to be gearing up for a sharp trending move to the downside. A close below 6,300 would provide momentum to the downtrend; a close above 7,000 could lead to a range-bound trading.

Key pivotals
BHEL (Rs 1,638): After some ranging price action in the past few weeks, the stock broke out of the trading zone on Friday. Price patterns suggest that the downtrend would gather steam this week.

The stock could drop to the crucial support zone at Rs1,200-1,250. A breach of the immediate support zone at Rs1,550-1,570 would confirm this view. Only a close above Rs1,900 would offer some respite to the stock.

Mahindra & Mahindra (Rs605): Along with companies from the capital goods sector, this was another stock that took a drubbing on Friday. The short-term outlook is bearish and a drop to Rs490-510 appears likely. Investors may use rally to trim holdings. A close past Rs682 is required to negate the bearish view.

Wipro (Rs415.4): The anticipated short-term downtrend materialised and the stock managed to hold above the stop loss level of Rs402. The recent price action indicates that the stock could drop to Rs380-390 in the near term. The expected rally to Rs495-500 would materialise on the completion of the move to Rs380-390. Long positions may be considered on weakness with a stop loss at Rs369 on daily closing basis.

Stock of the week

LIC Housing (Rs277): The short-term outlook is bullish and a move to Rs295-300 appears likely. A move to this target zone would materialise after a brief downward correction. There is a major support zone at Rs255-260.

Long positions may be considered on weakness by positional traders, with a stop loss at Rs245. Short-term scalpers can consider short positions with a stop loss at Rs304 and target of Rs260.

(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