Column

Sensex (20827.45): As anticipated last week, the index moved to the target zone of 21100-21200 and reversed direction subsequently. The Sensex’s inability to sustain at higher levels is a cause of concern. A quick and decisive move past 22000 would reinforce the long term bullish trend.

This would indicate that the Sensex is on track to move to the upper end of the target zone of 25500-26000. On the contrary, a close below 20000 would indicate that the index is in the process of topping out and a sharp slide could occur soon. Though there are no signs of reversal of long-term bullish trend, it would be safer to adopt a cautious approach and wait for confirmed signals of strength before committing funds aggressively into the market.

The recent price patterns suggest that there is a keen tussle between the bullish and bearish forces. In such a scenario, it would be prudent to wait for the market action to indicate which faction wrests control. The short-term outlook would be bullish till such time the support zone at 20000-20300 is not breached.

A move to the immediate target zone of 21800-22000 would be preferred view till such time this support zone is not broken. Investors may take at least partial profits in the stocks that have run-up recently and switch to the ones that have corrected such as Thermax, Crompton Greaves, Finolex Cables, Voltas, ABG Shipyard, Tata Chemicals, Cholamandalam DBS, Punj Loyd or Grasim.

Nifty (6200): The index hit the target cum resistance zone of 6350-6400 mentioned last week. It is positive to notice that the index held above the crucial support zone of 6130-6150 range. Support for the Nifty is at 5900-5950 range. The index could re-test or edge above the earlier resistance zone of 6350-6400. This view would be valid if the support zone at 5900-5950 is not breached.

The price action in the next few weeks would be crucial and would have major influence on the medium-term direction of the index. Instead of anticipating or acting with a preconceived notion, it would be safer to wait for the price action before taking the next course of action.

CNX Midcap (8974): The anticipated corrective phase materialised and the index edged below the support zone of 9000-9200 mentioned last week. The corrective phase does not appear complete as yet. After a short-term rally, the index is likely to resume the downward correction. After a rally to the immediate resistance zone at 9270-9320 range, the index is likely to drop to the major support at 8200-8300. Look to reduce exposures by taking profits in mid and small-cap stocks.

Key pivotals:
Indian Oil (Rs 681): The stock has bounced off the crucial support zone at Rs 665-680. The occurrence of a bullish Key Reversal Day pattern at the support zone is a healthy sign. The stock could bounce to the short-term target zone of Rs 735-740. This view would be negated on a close below Rs654. Have a stop loss at Rs 654 for short-term trading positions.

Reliance Communications (Rs 794): The outlook is positive and a move to Rs 845-850 appears likely in the short-term. This view would be invalidated on a close below the stop loss level of Rs 748. A close above Rs 855 could lead to a rally to the next target zone at Rs 880-890.

DLF (Rs 1196): The stock is in an uptrend and appears headed towards the target zone of Rs 1300-1325. Short-term support is at Rs 1070-1090 and major support is at Rs 1020-1030. Long positions may be considered on weakness with a stop loss at Rs 1069. From a medium-term perspective, a rally to Rs 1400-1450 appears likely.

Stock of the week:
UCO Bank (Rs 70.6): The stock has seen a sharp run up in the recent weeks and went into a corrective phase over the past few days. The recent fall has pushed the stock into a deep oversold region. A sharp bounce appears likely in the short-term and a move to Rs 82-85 appears likely.

It is positive to notice that the stock bounced off the short-term support of Rs 69 on Friday. Major support is at Rs 56-57 range. Long positions may be considered at prevailing levels and exposures may be enhanced on weakness. Have an initial stop loss at Rs 64. Positive outlook would be negated only on a close below Rs 54. Positional traders may settle for stop loss at Rs 55.

(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)