Column

Sensex could touch 17,300-17,500 in the short term and 19,500-20,000 in a longer timeframe.

Even while the market participants were digesting the fact that the index had overhauled the 16,000 mark, the influx of liquidity and sustained momentum took the index past 17,000 in no time.

The sharp rally witnessed in the recent weeks has pushed the index deeper into the overbought zone.

Though this does not necessarily mean that a sharp fall is imminent, there is a strong case for a significant correction to happen just any time now.

Instead of hazarding a guess as to when this correction would materialise, it would be prudent to enjoy the short-term rally as long it lasts with a caveat that the market could spring a surprise with a sizeable short-term correction any time.

Use a trailing stop loss and participate in the rally as long as the euphoria lasts.

Considering that the long term bull market is pretty much intact, a correction would be an opportunity to take exposure in quality stocks.

The recent patterns indicate that the index could move to the immediate target zone at 17,300-17,500 range.

From a slightly longer term perspective, a move to 19,500-20,000 is on the cards. This target would be intact as long as the support at 15,100 is not breached.

Nifty (5,021.35):
The long-term outlook is bullish and the index could move to the next target of 5,400-5,500 range shortly. The price action in the past few weeks indicates that the index could take a breather before resuming the next leg of the rally.

This breather could take either the shape of a prolonged range-bound action or a sharp and swift slide. It would be safer to wait for the market to indicate the mode of correction it adopts.

Investors may however have to take cognizance of the fact that the market is moving into an overheated zone and they could be caught unawares by a correction.

The anticipated correction would not have a bearing on the long-term bullish outlook and the index is on course to the next major target level of 5,900-6,000.

CNX IT Index (4,804):
After passing through a subdued phase, the IT Index appears to have bottomed-out at the recent low of 4,476.

There are quite a few factors that suggest that this low could be a significant bottom and support zone for the index.

There is a confluence of Fibonacci support and expansion target at the 4,430-4,450 range.

The index has taken support at this region and a potential “double-bottom” pattern may also be in place. A move past 4,890 would confirm the pattern and index could then move to 5,400-5,450 range.

Have a tab on software heavyweights as chart patterns indicate relative out performance of this sector, atleast in the short-term time. The bullish view is subject to the condition that the recent low of 4,490 should not be breached.

Key pivotals:

Ranbaxy Labs (434.4):
The stock is one of the top picks from the pharmaceutical sector and could deliver returns in excess of 20% in 2-3 months time frame.

The immediate target is Rs 480-490 and the medium term target is Rs 540-550.

Investors may buy the stock at prevailing levels and on weakness, with a stop loss at Rs 410.

Long term players may settle for the stop loss of Rs 395.

Only a close below Rs 395 would negate the bullish view.

Hindalco Industries (Rs 172):
The price patterns indicate bullishness and a move to Rs 188-190 appears likely.

There is a strong support at Rs 162-164 range.

This is one of the most promising stocks from the metals space.

Buy the stock at prevailing levels and accumulate on weakness for a short-term target of Rs 190.

From a relatively long term perspective, the stock could move to Rs 235-240.

Punjab National Bank (Rs 543):
The banking sector stocks have been attracting market interest in the recent weeks.

This stock has however been an underperformer in comparison to its peers.

The stock appears to be bracing for a sharp move up and could move to Rs 650-660 range. Have a stop loss at Rs 520 for long positions.

Stock of the week:
IndusInd Bank (Rs 74.8):
This stock has been one of the top performers in the recent weeks.

After a sharp rally, the stock got into a correction this week which appears complete.

The next leg of the rally could take the stock to Rs 92-95 range in the short-term.

Have a stop loss at Rs 69 for long positions.

Below Rs 69, the next crucial support is at Rs 64. The bullish view would be negated only on a close below Rs 63.

(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)