Banking, capital goods will hold the key

Investors are advised to adopt a slightly  longer-term approach

Sensex (18907.6): Weakness across global markets cast a bearish shadow on domestic market sentiment as well. Market movement was extremely choppy and the overall trend remained bearish during the week.

The price action has not, however, negated the long-term bullish view.

The index has a strong support at 18200-18400. A break at this range could lead to a test of the more crucial support zone at 17400-17600. The long-term bull trend would be negated only on a close below 17000.

While global markets have wilted under pressure from weakness in the American market, it is commendable to notice that Indian markets have not quite succumbed to pressure.

Though volatility has increased, there has been no instance of major sell-off. The recent weakness would fit comfortably as a correction to the recent rally.

Nifty (5663.25): The price movement in the index was similar to the Sensex.

While index heavyweights ruled weak, quite a few stocks were buzzing around. The market action has tuned stock specific and investors need to identify and position themselves in the right kind of stocks.

As observed last week, the market environment is conducive to positional trading. Investors may adopt a slightly longer-term approach rather than resorting to a short-term trading.

Quite a few stocks from large and mid-cap space appear promising and the efficient management of the portfolio is the key to building wealth in the present market
environment.

CNX Bank Index (8761): Though the short-term outlook has turned bearish, the index is on course to move to the target zone of 11000.

The short-term downward correction does not appear complete as yet and there is a possibility of a test of the 8000-8100 range.

The long-term bullish view and the possibility of a rally to 11000 would be intact as long as the key support at 7000 is not breached.

As observed last week, banking and capital goods sector would hold the key to overall market sentiment.

Key pivotals:

Gas Authority (Rs 463): The stock has been one of the star performers of the week. The long-term outlook is bullish and a move to Rs 525-550 appears likely.

The long-term bullish view would be intact as long as the support zone at Rs 420 is not breached. Use price weakness to accumulate the stock and have a stop loss at Rs 420 on a daily closing basis.

A trailing stop loss may be used in the event of a rally past the target zone.

Larsen & Toubro (Rs 4,127):  A sharp run-up in the share price of this company has been instrumental in the recent spurt in key market indices.

Considering the deep overbought levels that the stock has moved into, there is a case for an extended period of correction.

A test of the immediate support at Rs 3,600-3,700 range appears likely. Major support is at the Rs 3,100-3,200 band. Investors may scale down exposures and consider re-entry at lower levels.

Reliance Energy (Rs 1,838): Despite the overall market weakness, the stock has displayed solid resilience.

Price action was confined to a narrow trading zone and the stock appears to be bracing for a sharp move up. There is a strong support at Rs 1,600-1,650. A rally to Rs 2,600-2,700 would be the preferred view till such time the support at Rs 1,450 is not breached.

Stock of the week:

Gujarat NRE Coke (Rs 123): After completing a “Bull Flag” pattern, the stock moved up sharply on the back of huge volumes on Friday.

The short-term outlook has turned bullish and a move to Rs 145-150 appears likely. Long-term investors would get opportunities to exit beyond Rs 175-180.

The bullish view would be in force till such time the support at Rs 112 is not violated. Have a stop loss at Rs 112 for long positions.

Fresh exposures may also be considered with the same stop loss. If the support at Rs 112 is breached, the move to the target zone would get delayed.

Only a close below Rs 102 would negate the chances of a rally to the stated price objective. 

(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 nothave investment exposure in the stocks discussed above. Comments and feedback may be sent to bkrish16@gmail.com