Column

Sensex (15807.64): The market was confined to a trading range last week and neither of the trigger levels was hit.

The deep oversold condition that persists in the higher time-frame charts is supporting the index from hitting lower levels in the shorter time-frame.

From a fundamental perspective, market participants are also slightly wary of committing funds ahead of the credit policy and earnings seasons.

As observed in earlier weeks, the index has to move past 16660 to spark-off a sharp rally; a close below 15200 would trigger a downtrend.

Investors may wait for this uncertain ranging price action to be resolved before committing funds on a large scale. It would be safer to consider long positions on weakness till such time 15200 is not breached.

The price action over the past few weeks has resulted in a sharp drop in volatility. This kind of a situation is normally a precursor to a sharp trending move. Instead of having a bias about the direction of the eventual trending move, it would be prudent to wait for the market to provide clues about direction.

In the event of an upside breakout, the index could move to 17750-18000; a downward break could push the index to the crucial support zone at 13400-13800. In the long-term charts, there is nothing to indicate that the index is out of the woods as yet. From a medium-term perspective, the index could test the support zone of 13400-13800.

Nifty (4777.8): The index is still confined to the zone of uncertainty and the price action over the next few days would provide a clue about the short-term trend. There is a strong support at the 4450-4550 zone. There is a fair chance of a sharp upward move in the short-term as long as this support zone is not breached.

On the upside, the index has to contend with quite a few significant resistance zones. The initial resistance is at 5000 and the more critical zone is at 5150-5200. As markets continue to lurk in this trading zone, investors may look for pockets of strength and take positions in such stockssectors.

The action would turn more stock-specific and a selection of right stocks and having a portfolio of strong names would assume greater importance in this environment.

The present market condition is suitable for short-term scalpers and there is a risk of getting whipsawed in both directions for positional traders. Positional traders may wait for the market to get into a trending phase before committing funds in a big way.

CNX IT Index (3824.65): Infosys is scheduled to come up with its earnings scorecard on Tuesday and this is expected to act as a catalyst for the next major short-term move in the market. A look at the IT index indicates room to the upside. The index could rally to the immediate resistance zone at 4325-4350 range.

A close above 4400 could trigger a rally to 4850-4900. As long as support at 3470-3490 is intact, the index would have a fair chance of a move to the resistance zone at 4850-4900. A breach of the support zone could lead to a test of the next support zone at 3150-3200.

Key pivotals:
Bhel (Rs 1,830): The stock managed to rebound from the intermediate support zone of Rs 1,550-1,570 mentioned last week. Though this short-term bounce has averted the continuation of the earlier downtrend, the stock is susceptible to a fall to Rs 1,200-1,250.

In the event of a continuation of the recent short-term bounce, the stock could rally to Rs 2,040-2,070. The possibility of a fall to Rs 1,200-1,250 would be negated on a
close above Rs 2,125. Investors may hold with a stop loss at Rs 1,690 and reduce exposures on evidence of weakness at Rs 2,040-2,070.

Dr Reddy’s Labs (Rs 591): The short-term outlook is bullish and a move to Rs 650-660 appears likely. Long positions may be considered with a stop loss at Rs 560 on daily closing basis. Short-term traders and those who dabble in the futures market may have a slightly more aggressive stop loss at Rs 574.

State Bank of India (Rs 1,668): The stock is consolidating in a narrow trading range and a sharp move may be just round the corner. Given the possibility of a swift move when volatility expands, this is one stock that short-term traders should keep an eye on. A drop below Rs 1,600 would trigger a fall to Rs 1,425-1,450. The stock could zoom to Rs 1,825-1,850 if it moves past Rs 1,720.

Stock of the week:
Inox Leisure (Rs 108): After a sharp downtrend since early January, the fall was arrested at the recent low of Rs 81. The subsequent price action and the spike in trading volumes indicates that the stock could seek higher levels. A move to the key resistance zone of Rs 140-145 appears likely.

Stop loss for long positions may be placed at Rs 95 on a daily closing basis. In the event of a breach of this level, positions may be considered afresh at lower levels with a revised stop loss at Rs 80 on daily closing basis. The possibility of a rally to the target zone would be negated only on a close below Rs 80.

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