Email
Print
Share
Sensex (13469.85): The index moved in line with expectations and the trend turned bearish after a brief corrective rally. The short-term bounce reversed at the resistance zone of 13900-14200 mentioned last week. After hitting of high of 14066, the trend turned down on Friday.
Going by the way the technology sector stocks were sold off on Friday, the market appears to be disappointed with the earnings and guidance reported by Infosys. This, coupled with the drop in industrial output, pulled down the markets on Friday. As observed in the previous week, the recent price action does not suggest that the worst is over.
There could be a ranging price action with moderate upward bias before the next leg of downtrend begins. A drop to 12300-12400 would be the preferred view till such time the bullish trigger level of 14650 is taken out. Investors need to tread with caution as the longer term trend is bearish.
Those looking to build a portfolio with a holding period of 18 months or more may consider token buying at lower levels. Staggered and phased buying at lower levels would be advisable in the present market scenario. Else, long term investors may invest in mutual funds through the systematic investment plan route.
It is also critical to diversify the portfolio and look into other asset classes, precious metals in particular. Investors may also consider exposure in commodity linked mutual fund schemes.
Nifty (4049): After edging past the resistance zone of 4130-4150, the index failed to make any headway and the trend turned bearish on Friday. The outlook remains bearish and a test of 3550-3560 range is the preferred view. As observed last week, a close past 4350 is required to offset the scope of further fall.
From a relatively longer term perspective, the chance of a retest of the June 2006 lows of 2600 is not ruled out. Such a possibility is also confirmed by a similar target arrived at by using Roger Babson's Action-Reaction methodology. A close past the swing high of 4680 would be required to indicate a convincing trend reversal.
CNX IT Index (3839.5): The sentiment towards the software sector took a knock after Infosys came up with its corporate earnings report for the first quarter of this fiscal. The stocks from this sector offered some resilience amidst the carnage witnessed since January. The sharp crack on Friday indicates the resumption of the medium term downtrend.
Recent price action indicates that the index could test the support zone at 3300-3350. A close past 4200 is a prerequisite to negate the scope for further fall. From a trading perspective, short positions may be considered with a stop loss at 4200 and initial target of 3350.
Key pivotals:
Larsen & Toubro (Rs 2,357.2): The stock ruled firm in the early part of the week and also moved to the target zone of Rs 2,525-2,550 mentioned last week. After moving to a high of Rs 2,557, the trend turned bearish on Friday. Though there are chances of a retest of the resistance zone at Rs 2,525-2,550, there is no evidence to suggest that the stock is out of the woods from a medium term perspective. A close below Rs 2,100 would suggest that the stock would drop to Rs 1,800-1,850.
BHEL (Rs 1,521): The price action was in line with expectations and the trend turned bearish after a short-term bounce. The stock reversed direction at the resistance zone of Rs 1,600-1,625 mentioned last week. The stock is stuck in a trading range and a breakout from this range would set the tone for the next major directional move. A close above Rs 1,690 would have bullish implications, while a drop below Rs 1,390 would impart weakness.
Infosys Technologies (Rs 1,676.5): This stock was one of the top performers in the first half of 2008. The recent price action and the sharp fall on Friday indicate that the stock is headed towards lower levels. The immediate support is at Rs 1,550-1,570. A break below this level could push the stock to Rs 1,450-1,475. As long as the stock trades below Rs 1,780, the possibility of a drop to Rs 1,450-1,475 would be alive.
Stock of the week:
Axis Bank (Rs 670): The stock has been in a major downtrend and has taken support at the crucial zone at Rs 550-560. The stock could rally to Rs 725-740 in the short term after a brief corrective phase. A move past Rs 740 could lead to a rally to Rs 775-780.
Long positions may be considered on the evidence of support at Rs 635-640 with a stop loss at Rs 610. 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 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.
