Bourses still in uncertain territory

The Sensex has to get past the positive trigger level of 14,500 for resumption of the uptrend

Sensex (13934.27):  Market action was lacklustre during the past week. The truncated trading week appears to have forced market participants to curtail their trading commitment. As a result, the index registered a nominal weekly gain of 25 points. There is no change in the market’s technical condition.

The market is still in uncertain territory and the price action over the next few weeks would determine the medium-term outlook. As observed last week, the index has to get past the positive trigger level of 14,500 for the resumption of the uptrend. A weekly close above this level would lead to a rally to 15,500-16,000.

On the downside, a weekly close below 13,400 would have bearish implications. As long as the index rules below the recent high of 14,724, the chances of a retest of the recent low of 12,300 would be alive. A quick and decisive move past the 14,500, followed by a close above 14,724 would have major bullish implications. As always, investors may look for opportunities to reduce exposures and take profits. Traders may tighten their stop loss to protect unrealised gains.

Nifty (4117.35): The index was confined to a trading range during the week. The price action does not provide any clue about the medium-term outlook. The index has to move past earlier high of 4,245 for the continuation of the long-term uptrend. There would always be a chance of a retest of the recent low of 3,554, as long as the high at 4,245 is not broken.

At the moment, the price action does not provide a clear indication of the near-term price action. A close above 4,245 would have positive implications; a weekly close below 3,900 would mark the start of the downward move towards 3,554. It is better to wait for price action to unfold before committing fresh exposures.

CNX Bank Index (5657): The index moved in line with expectations. A bearish trend prevailed and the index moved closer to the target zone of 5,450-5,500 mentioned last week. The short-term outlook is bearish and a drop to 5,350-5,400 appears likely. The bearish short-term view would be negated only on a close above 5,875. A close past 5,875 would help the index move to the next target range at 6,100-6,150.

Key pivotals:
BHEL (Rs 2,496): The stock’s price action was similar to broad market indices; the stock was confined to a narrow trading range. The price movement has not negated the view of a rally to Rs 2,660-2,690. The positive view would be negated on a close below Rs 2,410. Stop loss for long positions may be placed at Rs 2,410.

SAIL (Rs 134):  The expected fall to Rs 119-121 did not materialise. The stock took support at Rs 129 and staged a recovery subsequently. The short-term trend hinges on the price movement in the next few days. A close above Rs 138 would indicate that the stock could move to Rs 145-148; a close below Rs127 would push the stock to Rs 119-121.

Reliance Industries (Rs 1,583): The short-term outlook appears bearish and the stock could drop to Rs 1,500. The medium-term outlook, however, is bullish and the stock’s move to Rs 1,700-1,720 appears likely. The bullish view would be invalidated on a close below the support level of Rs 1,480. Long positions may be considered on weakness with a stop loss at Rs 1,480, on a daily closing basis.

Stock of the week:
KLG Systel (Rs 382): The stock has been in an uptrend, after having touched a low of Rs 238 a few weeks ago. The subsequent price patterns indicate that the next leg of the uptrend is underway. The short-term outlook is bullish and a move to Rs 435-440 appears likely. Remain invested with a stop loss at Rs 350. Long positions may also be considered on weakness with a stop loss at Rs 365. The bullish view would be invalidated only on a close below Rs 350. 

(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.