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Investors are advised to tread cautiously at higher levels

Sensex (19243.17): It was quite an eventful week with the market staging a sharp recovery since Tuesday. Shrugging aside concerns relating to P-notes , the market continued its upward journey and scaled a new historic high on Friday.

There were a few positive takeaways in the way the index behaved during the week. That the Sensex held above the crucial support zone at 16700-17000 was an initial sign of strength. The subsequent close above the bullish trigger level of 18500 mentioned last week was another bullish signal.

The price action indicates that each segment of the uptrend is getting extended into sub-waves. This is a sign of extreme strength and investors may ride it as long as it lasts, with a protective stop-loss in place to lock-in a major portion of unrealised gains.

The index is on course to move to the target zone of 19500-20000. The recent price patterns suggest that the Sensex could stretch itself to the next major target-cum-resistance zone at 20500-21000. The immediate support is at 18300-18500, followed by the next at 17900-18000. Though the short-term outlook is bullish, the index is back into overbought zone and investors need to tread cautiously at higher levels.

Nifty (5702.3): Not only did the index hold above the bearish trigger level of 4900, it also moved past the bullish trigger of 5500 that confirmed the resumption of earlier uptrend. The index is on course to move past the 6000 mark and could test the next target zone of 6250-6300.

Key support levels placed at 5430-5450, followed by 5250-5300. A move to the short-term target zone of 6250 would the preferred view as long as the first support zone at 5430-5450 is not breached. Investors may stick to fundamentally sound large-cap stocks.

CNX Bank Index (8750): Stocks from the banking sector were among the top performers of the week. With the crucial RBI meeting around the corner, banking stocks could see a lot of action this week. Going by the recent price patterns, the outlook for the index is bullish and a rally to 9600-9700 appears likely. In the long term, the index could move past the 11000 mark. The long-term trend would be bullish as long as the support at 8000 is not breached.

Key pivotals:
Mahindra & Mahindra (Rs 802): The price movement was in line with expectations and the stock took bounced back from after hitting the crucial support zone of Rs 690-700 mentioned last week. The long-term trend remains bullish and a move to Rs 950-1,000 appears likely. Remain invested with a stop loss at Rs 740. Price weakness may be used to buy with a stop loss at Rs 740.

BHEL (Rs 2,432):The stock took support just above the support zone of Rs 1,850-1,900 mentioned last week. After touching a low of Rs 1,970, the stock staged a sharp recovery on Tuesday. The recent price action indicates that the next leg the uptrend is under way and a move to Rs 2,750-2,800 appears likely. This view would be invalidated on a close below Rs 2,175.

ICICI Bank (Rs 1,185): This is one of the better performing stocks from the banking space. The outlook is bullish and a move to Rs 1,350-1,400 appears likely. Long positions may be considered at prevailing levels and on weakness with a stop loss at Rs 1,070. Long-term investors may get an opportunity to exit at or beyond Rs 1,600. The long-term bullish view would be negated on a close below Rs 1070.

Stock of the week:
Dena Bank (Rs 59.3): After a steady run-up, the stock has been in a corrective phase in the recent weeks. This corrective phase appears to have been completed at the recent low of Rs 50. The stock is in a long-term uptrend and could move to Rs 75-80. Investors may consider a long position as the short-term outlook, too, has now turned bullish.

The positive trend would prevail till such time the price holds above the support level at Rs 48. Long positions may be considered at prevailing levels and on weakness with a stop loss at Rs 54. Though the chances of the stop loss being triggered is minimal, a breach of it would not negate the bullish view.

(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)