Column

With the results season kicking off, volatility in trading is expected

Sensex (20,207): The price patterns and an overall look at the longer term charts indicate that the trend is bullish and the index could move to a 21,100-21,200 range. The waning momentum and the lack of follow-up after a thrust are disconcerting factors. There is a sense of uneasiness at higher levels and, with the earnings season getting underway, market could see some volatile and choppy action.

A sharp spurt in the next few days would lend credibility to the bullish undertone. In technical terms, the sharp rally on Friday is a breakout bar from the earlier congestion zone. And, the index has to hold above the Friday’s low of 20,360 for the upward dynamics to play out. Else, the index could get back into a trading range and downward trend would gather steam on a close below 19,300.

It would be prudent to take some profit, especially in the mid-cap stocks that have run-up sharply in the recent weeks. There will always be opportunities to re-enter at lower levels. Those who are aggressive and are weary of missing out on a runaway rally may use a trailing stop loss to protect unrealised gains.

Nifty (6,274.3): The index has hit the target zone of 6,250-6,300 mentioned last week. Though the short-term trend appears bullish, there is a case for a correction to set in soon. The mid-cap stocks have been on a sharp upward spiral and many of them have reached extreme overbought region.

Given the overall market structure and internal dynamics in the market, the risk-reward equation does not appear to compelling to hang on to long positions. A close below the immediate support range of 6,130-6,150 would indicate that the bears are having a tighter grip over the market. The immediate target-cum-resistance zone is at 6,350-6,400.

CNX Midcap (9,637): This index has been a sharp uptrend in the recent months. There are no signs of reversal of this long-term uptrend and the index could move to 10,500-11,000. The recent rally has however pushed the index into a short-term overbought region. A test of the immediate support zone of 9,000-9,200 appears likely. Though it may not be prudent to go short in this index, investors may adopt a cautious approach and take profits in long positions on signs of weakness.

Key pivotals:
Cairn India (Rs 261.3): The stock moved closer to the target zone of Rs 270-275 mentioned last week. A move to this target zone would commence after a short-term correction. The immediate support is at Rs 252-256. Long positions may be considered on weakness with a stop loss at Rs 242.

Reliance Energy (Rs 2,510): The stock has moved closer to the target zone of Rs 2,600-2,700 mentioned earlier (edition dated November 12, 2007).

After a brief short-term correction, the stock is likely to resume the uptrend shortly. The immediate support is at Rs 2,270-2,300 and major support is at Rs 2,175-2,200. Price weakness may be used to take long positions with a stop loss at Rs 2,170. The first target zone is Rs 2,650-2,700 and major target-cum-resistance is at Rs 2,775-2,800.

Sterlite Industries (Rs 1,060): The stock has been in consolidation mode and appears to be gearing up for the next major move on the upside. The short-term target is at Rs 1,160-1,180 and the medium-term target zone is at Rs 1,400-1,450. Long positions may be considered with a stop loss at Rs 990. The medium-term bullish view would be negated only on a close below Rs 930.

Stock of the week:
Moser Baer (Rs 326): After an extended period of consolidation in the recent weeks, the next leg of the rally appears underway. The stock is in a long-term uptrend and could move to Rs 430-450 range. The short-term target is Rs 365-370. The long-term bullish view would be invalidated on a close below Rs 270. From a short-term trading perspective, long positions may be considered with a stop loss at Rs 300. A breach of this stop loss level of Rs 300 would not negate the long-term bullish view. It would only delay the eventual progress towards Rs 430-450 levels.

(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