Column

Sensex (16737): The anticipated short-term correction materialised during the week. The fall during the week has pushed the index to the crucial support zone and it is imperative for the index to hold at these levels.

A breach of the support levels at 16700 would be a forewarning of a much deeper corrective phase stretching up to 16150-16250.

Though the medium-term trend is bullish and a move to 18250-18300 is the preferred view, the recent fall and the momentum behind it is a cause of concern. It is disturbing to notice that the uptrend was arrested right at the 20-week moving average, which is also the middle line of the Bollinger Band. A quick reversal from current levels is required to reduce the chances of a much deeper correction.

The immediate resistance is at 17212, which is the midpoint of last week’s huge black candlestick. The index has to overhaul this resistance level at the earliest to reinstate bullishness. Though the medium-term bullish view is still intact and the recent fall still fits into the parameters of a short-term correction, it would be crucial for the bullish forces to reassert themselves at the earliest to remain in control.

Investors need to tread with caution, as the expected correction is turning out to be out of proportion to the recent rally. The gains recorded over two weeks have been wiped out last week. Given the severity of the fall, this could morph into a first leg of a new downtrend.

Nifty (4983): A bearish trend prevailed as anticipated last week. The recent downtrend has pushed the index below support zone at 5000-5030. The index has to stage a swift recovery to mitigate the possibility of further deterioration in the medium term. Though the breach of the 5000 mark is a worrying factor, the medium-term bullish trend would not be under threat unless 4700 is breached.

A close below 4700 would imply that the index is headed towards the long-term downside target zone at 4200-4300. The index is now at a critical juncture and the price movement over the next few weeks would be critical in deciding the next major directional move.

While a rally to 5650-5700 is the favoured view, it would be advisable to wait for market action to provide clues about the next major move.

A weekly close below 4969 would trigger a ‘sell” signal and would be an early indication that the January lows of 4468 would be retested. On the other hand, a quick move past 5110 would indicate the resumption of uptrend.

CNX Bank Index (7299): After clearing the initial resistance zone at 7750-7800, the lack of follow-up buying action is a sign of weakness. The subsequent drop below bearish trigger level of 7400 has negated the earlier bullish view. The short-term view is bearish and the index could test the immediate support at 7050-7090.

The banking index could stage a sharp rebound if the recent fall is arrested at the interim support at 7050-7090. A close below 7050 would suggest that the index is headed towards 6150-6300.

Key pivotals:
Bharti Airtel (Rs 842.2): The stock dropped below the support zone at Rs 870-880 and this resulted in a sharp slide to the next support zone at Rs 790-800. The successful test of the support zone at Rs 790-800 and the subsequent recovery in the last couple of days is a sign of strength. The stock could move to Rs 925-950 zone in the short-term. This view would be in force till such time the stock holds above Rs 790. Have a stop loss at Rs 790 for long positions.

ITC (Rs 218.3): After a sharp fall on Thursday, the price action on Friday indicates that the stock is gearing up for the next leg of the uptrend. The occurrence of a “key reversal day” pattern on Friday at the crucial support zone of Rs 212-215 is a positive sign. The stock could move to Rs 235-240 in the near term. Stop loss for long positions may be placed at Rs 210.

Cairn India (Rs 274): The stock moved up and also hit the target zone of Rs 275-280 mentioned last week. The price movement in the past couple of trading sessions suggests that a short-term correction may be underway.

A test of the immediate support at Rs 250-255 appears likely. Investors may take at least partial profits and may consider fresh exposures on the evidence of support at the support zone.

Stock of the week:
Praj Industries (Rs193): After a sharp run-up in the recent weeks, the stock has gotten into a corrective phase. A test of the immediate support zone at Rs 170-175 appears likely. The medium-term outlook remains bullish and the next leg of the uptrend would resume on the completion the anticipated short-term corrective phase.

Investors may consider long positions on the evidence of support at Rs 170-175 zone. Stop loss for long positions may be placed at Rs 152. The stock could move the next target zone of Rs 235-240 on the completion of the anticipated short-term downtrend.

(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)