Column

Sensex (17434.94): The index managed to hold above the crucial support zone at 16700 and staged a sharp reversal during the week. This has averted the threat of a deeper correction and the short-term trend has now turned bullish.

As observed in earlier weeks, the index is on course to hit the target zone of 18250-18300.

The recent rally has pushed the index to the resistance zone of 17364 in the weekly time frame. This resistance level represents the 20-week moving average, which is also the middle line of the Bollinger Band. The trend turned weak when the index encountered resistance right at this moving average a couple of weeks ago.

Though the index has registered a close above the resistance level of 17364, it is imperative to sustain the recent momentum and move up further for bullish forces to assert their strength. A close below 16900 would be an early sign of weakness and would warrant scaling down of long positions.

There are a few factors that indicate that the worst is probably over for the stock market at least from a medium-term perspective. A move past the previous week’s high of 17736 would establish the sequence of higher highs and higher lows which would be a healthy sign.

Besides, the way the market has taken the slowdown in industrial production and the recent spike in inflation in its stride suggests that much of the concern pertaining to inflation and economic slowdown is already factored in. It seems investors and market participants are looking for some excuse or positive development to initiate fresh long positions.

Nifty (5157.7): The index staged a smart recovery that has negated the possibility of further slide. Positively, the support zone at 4950-5000 has successfully arrested the corrective fall. The index has to hold above 4910 for the short-term bullish trend to remain intact.

There is a strong resistance at the 5250-5260 range. This zone coincides with the high of the breakout bar from the trading zone that was formed during the first quarter of this year. The index has to clear this resistance zone for the bullish trend to gain momentum. This would provide the impetus for the next leg of the rally to 5650-5700.

BSE metal index (17058): This index has been one of the top performers in the recent weeks. Price patterns suggest that the index could move to the immediate target zone at 18500-18600. From a longer-term perspective, a move to 20500-21000 is not ruled out.

The medium-term trend would be bullish and the possibility of a rally to 20500-21000 would be favoured view as long as support at 14800-15000 is not breached. Investors may use interim price weakness to add stocks from the metals space to ride this rally in the metal index.

Key pivotals:
Sterlite Industries (Rs 896): After the pounding the stock took from the high of Rs 1,150, the recovery from the recent lows of Rs 657 has been quite strong. The stock is in an uptrend and could move to the target zone of Rs 1,000-1,020 in the short term.

Long positions may be considered with a stop loss at Rs 790. There is a strong support at Rs 830-845 band. Price dips to this zone could be used to enhance exposures.
LIC Housing (Rs 351.4): This stock has been one of the top performers in the recent weeks. The outlook is bullish and a move to Rs 400-410 appears likely. Long positions may be considered at or near the support zone at Rs 332-340 with a stop loss at Rs 325. A trailing stop loss may be used in the event of a move past the target zone.

Maruti Suzuki (Rs 819): The stock enjoys a strong support at Rs 680-700 band. The long-term trend would be bullish as long as this support zone is not breached. Recent price action suggests that the stock could move to Rs 915-920 in the near term. The short-term bullish view would be negated on a close below Rs 750. Long positions may be considered on weakness with a stop loss at Rs 750 on a daily closing basis.
Stock of the week:

Suzlon Energy (Rs 308): After a brief corrective phase, the stock appears to have commenced the next leg of rally on Friday. The sharp upward spike on Friday was accompanied by a spurt in trading volumes as well. This is a sign of strength and the stock could move to the immediate target zone at Rs 345-350. Investors willing to wait for a while may get exit opportunities at Rs 375-380.

The bullish view would be invalidated on a close below Rs 261. Long positions may be considered at prevailing levels and on weakness with a stop loss at Rs 261. Short-term traders may settle for a relatively closer stop loss of Rs 283. If the stop loss at Rs 283 is breached, fresh long positions may be considered at lower levels with the revised stop loss of Rs 261.

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.