Column

Sensex (16,481.2): After several weeks of ranged-in price action, the index displayed signs of breaking out of this trading zone last week. The index has to negotiate a short-term resistance zone at 16,650; a close above this range would trigger a rally to the crucial resistance zone at 17,250-17,300.

A rally to at least 17,300 would be the favoured short-term view till such time the support-cum-bearish trigger level of 15,600 is not breached. From a short-term perspective, it would be advisable to consider long positions on weakness with a target of 17,450.

A close above 17,400 could push the index to 18,250-18,300. At the moment, there is a fair chance of a rally to 18,250-18,300.

The recent price action and the buoyancy witnessed over the past few weeks indicate that the market has factored in much of the negative news pertaining to inflation, interest rates and a slowdown in economic growth.

As long as the strong support base at 15,300-15,600 is intact, the index would tend to have an upward bias with an eventual target of 18,250-18,300.

A quick and decisive break of this support zone would impart short-term bearishness and could lead to a test of 13,400-13,800. Based on the recent technical patterns, the odds are stacked in favour of a move to the target zone of 18,250-18,300.

As observed in earlier weeks, investors need to focus on the strategy to capitalise on the anticipated short-term spike in stock prices. Considering almost all the stocks have been butchered in the fall since January, stock selection would assume far greater significance, as quite a few stocks and sectors would appear attractive at current levels.

Nifty (4958.4): There were signs of an upside breakout from the trading zone that the index has been confined to in recent weeks. A close above 5,150 would confirm the possibility of a rally to 5,650-5,700.

There is a strong support at 4,600-4,650 and intermittent weakness could be used to take long positions with a stop loss of 4,600. In the event of a drop below 4,600, the index could test the next support zone at 4,400-4,450.

The downside risk in the present market condition does not appear beyond 4,400 from a short- to medium-term perspective.

CNX IT Index (4304.2): The index ruled firm and also moved to the target zone of 4,325-4,350 mentioned last week. The uptrend does not appear complete and a move to 4,850-4,900 appears likely.

As the recent uptrend has pushed the index into an overbought zone, there is a possibility of a brief corrective phase. Such weakness would be an opportunity to take exposures in the technology sector. Short-term support is at 4,000-4,050.

Key pivotals:
Cairn India (Rs 257.6): The stock has been one of the top performers in recent weeks. The short-term trend is bullish and a move to Rs 285-290 appears likely. A move to this target zone would materialise after a short-term corrective phase.

The immediate support is at Rs 245-250. Long positions may be considered at or close to this support zone with a stop loss at Rs 240.

Infosys Technologies (Rs 1,666): The stock shot-up after the company came up with its quarterly numbers and earnings guidance. There is a strong overhead resistance at Rs 1,775-1,800 range and support at Rs 1,550-1,570.

Long positions may be considered on weakness with a stop loss at Rs 1,510. A close past Rs 1,800 could push the stock to Rs 1,900-1,920. The bullish view would be invalidated only on a close below Rs1,400.

Dr Reddy’s Labs (Rs 606): Except for a sharp rally on Tuesday, the stock ruled weak last week. The short-term outlook is bearish and a drop to Rs 550-560 appears likely. Any attempt to move up would face resistance at Rs 615-620.

Short-term traders may consider short positions in this resistance zone with a stop loss at Rs 630. Traders may “stop and reverse” in the event of a surge past this resistance zone.

Stock of the week:
Dish TV (Rs 55.4): The recent downtrend was arrested at the low of Rs 42. The subsequent rally has been impressive and the stock could seek higher levels in the short-term. A move towards Rs 65-68 appears likely in the near term. The bullish view would be invalidated on a close below Rs 45.

Long positions may be considered on weakness with a stop loss at Rs 49 on a daily closing basis. Short-term support is at Rs 50-52 and resistance at Rs 56.5. Traders may take long positions on weakness as well as on a breakout past Rs 56.5. Stop loss may be placed at Rs 52 on a closing basis, for trades taken on the breakout of Rs 56.5.

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