Sensex (15234.57): The index moved within the striking distance of the upper end of the target zone of 15,500-16,000.
The index could test the immediate support at 14,800-14,900
Sensex (15234.57): The index moved within the striking distance of the upper end of the target zone of 15,500-16,000. The anticipated corrective phase materialised and the occurrence of a “Doji Star” pattern and the huge sell-off on Friday indicates that the short-term trend is bearish.
The price patterns and the momentum behind the fall indicate that this corrective phase would not end in a hurry. Though there are no signs of long-term trend reversal, there is a case for a slightly prolonged phase of bearishness. The index could test the immediate support at 14,800-14,900. The chances of a long-term trend reversal would gain currency on a drop below 14,500. Only a close above 15,815 would reinstate bullishness.
Nifty (4445.2): After a strong opening in the week, the index went into a corrective phase as anticipated. Though a short-term correction was anticipated, the degree of fall on Friday was surprising in the overall context of the market. As a result, the index could get into a much deeper corrective mode and a test of 4,320-4,350 range appears likely.
While the short-term trend has turned bearish, the long-term uptrend has not been threatened, yet. A close below 4,291 would be an early indication of a reversal of a bigger order and a close below 4,100 would confirm the case of a major trend reversal. Investors need to get into a cautious mode and avoid big ticket exposures on the long side. Only a close above 4,625 would indicate the resumption of long-term uptrend. It would be safer to avoid long positions till such time this level is taken out.
CNX Bank Index (6699): Contrary to expectations, the index ruled weak and also closed below the bearish trigger level of 6,700 mentioned last week. As a result, the short-term trend has turned bearish and could lead to a test of 6,440-6,460. Considering that the overall market has entered into a corrective phase, this index, too, could see a rub-off and is likely to seek lower levels in the near term. Below 6,440, the next support is at 6,100-6,200.
Key pivotals:
Larsen & Toubro (Rs 2,420): The stock moved up and hit the target zone of Rs 2,650-2,700 mentioned last week and reversed subsequently. The recent price patterns indicate continuation of the short-term bearish trend. The occurrence of a “Evening Star” pattern in the daily charts and a “Shooting Star” pattern in the weekly chart confirms the weak outlook. The immediate support is at Rs 2,300-2,320, followed by Rs 2,180-2,200. Resistance is at Rs 2,525-2,550. Investors may use any rally to reduce exposures. At the moment, only a close above Rs 2,620 would reinstate bullishness.
BHEL (Rs 1,661): After moving to the target zone of Rs 1,850-1,900, the trend turned weak since Wednesday. The stock has a strong support at Rs 1,550-1,575. There is a possibility of a bounce off this support range and the stock could move towards Rs 1,750-1,800 range. Investors may reduce exposures on a rally and initiate fresh positions on weakness. Have a stop loss at Rs 1,540 for long positions. A close below Rs 1,540 could lead to a continuation of the recent downtrend.
ACC (Rs 1,000): The stock ruled weak and also dropped to the support range of Rs 975-1,000 mentioned last week. The recent price patterns indicate that the correction could last longer than earlier expectations. At the moment, only a close above Rs 1,110 would negate the short-term bearish trend. Investors may reduce exposures on rally to the resistance zone at Rs 1,060-1,080 range.
Stock of the week:
Ambuja Cements (Rs 125.4): The stock appears to be in the midst of a bearish phase and could test the low of Rs 100. Investors may look to reduce exposures on any rally to the resistance zone at Rs 130-133. Investors willing to take risk may also consider short positions on rally with a stop loss at Rs 142 on a daily closing basis.
The bearish outlook would be negated only on a close above Rs 142. This could lead to a retest of the earlier high of Rs 153. At the moment, the chart patterns favour a fall to the recent low of Rs 100, if not lower.
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.
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