Investors need to take a planned approach

Outlook bullish, short-term blips likely

Sensex (19976.23): It was a momentous week for the markets with the Sensex moving past the 20000 mark and the Nifty edging past 6000. In the process, the Sensex achieved the first target of 19500-20000 mentioned in the earlier weeks. The bull run is not over as yet and the Sensex would now gun for the next target zone at 20500-21000.

Going by Roger Babson’s Action-Reaction methodology, the index could move to 23500-24000 in the medium term. This view would be valid if the index holds above the short-term support zone at 19200-19300.

The long-term bullish trend would be negated on a close below the major support level at 17000. Though the undertone is bullish and the ride at the markets is expected to last, there would intermittent short-term blips, which would be opportunities to add exposures or make fresh entry.

Nifty (5932.4): The outlook remains bullish and the index is on track to hit the target zone of 6250-6300 mentioned last week. The immediate support is at 5500-5550 range and the long-term bullish outlook would be under threat on a close below 5000. As the long-term trend is bullish, investors need to take a planned approach and exploit the market condition to build wealth.

Sticking to fundamentally sound companies and adhering to a clear-cut investment plan both in terms of entry and profit-booking are essential aspects that an investor has to pay attention to. The current market environment is conducive to build wealth at a rapid pace and it is better to avoid short-term trading in such an environment. Taking concentrated bets in a select set of stocks and sticking with them would be a safe way to take advantage of this market.

CNX Bank Index (9560.7): The market appears to have taken the CRR hike in its stride and banking stocks appear poised for a major up move in the short-term. Stocks such as Bank of Baroda, Bank of India, SBI, Axis Bank and ICICI Bank are likely to lead the rally in the banking index. As observed last week, the index is on course to move to the target zone of 11000. Apart from capital goods, banking is another sector that has significant upside potential from a long-term perspective.

Key pivotals: State Bank of India (Rs 2,250): The long term outlook is bullish and the price action on Friday indicates that the stock is gearing for a sharp upward move in the near term. Use price weakness to enhance exposures or to take fresh long positions. The immediate target is Rs 2,650-2,700. Major support is at Rs 2,040. The bullish view would be negated on a close below Rs 2,000.

BHEL (Rs 2,718):  The stock has had a dream run in the recent months and the price patterns indicate that the party is not over as yet. The momentum is still strong and using the Roger Babson’s Action-Reaction tool, the next target for the stock is Rs 3,400-3,500. Long-term investors may use price weakness to build exposures in the stock. The bullish view would be negated on a close below Rs 2,400.

Reliance Energy (Rs 1,853): The pace at which this stock has run-up in the recent weeks has been quite extraordinary and the interesting aspect is that the stock does not seem to be gasping. The stock appears to be gearing for the next move and a rally to Rs 2,600-2,700 appears likely. Short-term support is at Rs 1,670 and a drop below this level would delay the journey towards this target zone.

Stock of the week: Shringar Cinema (Rs 73.5): Anyone trying to identify a symmetrical triangle pattern need not look beyond the weekly chart of this company. The pattern is almost picture perfect and the share price has broken above the trendline with a huge pick-up in volumes this week.

The stock is on its way to move to the Rs 95-100 range in the near term. The positive view would be valid as long the stock holds above Rs 62. Long positions may be considered at prevailing levels and on weakness with a stop loss at Rs 62.

(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)