Equities are unlikely to speed ahead

Sensex (17464.89): Amid volatile price action, the index went within striking distance of the resistance zone at 19000-19200 mentioned last week. The inability to hit this zone indicates that the bearish forces are in control of proceedings. 

The daily and weekly trend is bearish and selling on rally at appropriate resistance levels would be a safe strategy.

The markets would remain volatile and it would be imperative for traders to adhere to money and risk management tools. The short-term resistance zone is at 17850-18250 and the major resistance zone is at 19000-19200.  

The index appears on course to retest the recent low of 15300-15500 range. This would be the preferred view as long as the index stays below 19200. Considering that a lot of investors are stuck with positions entered into at higher levels, there would be a deluge of selling when the index gets closer to the resistance zones mentioned above.

The current market condition is conducive for intra-day trading with tight stop loss. Investors who are comfortable with a “buy-and-hold” strategy may wait until the trend turns bullish in the weekly time frame. Given the overall technical picture and impending supply of stocks are higher levels, markets are unlikely to zip ahead in a hurry.

Long-term investors may avoid buying aggressively in the anxiety of not missing out on the next major upward move. From a long-term perspective, the index has major support at 16400-16600. The long-term bullish trend would be under threat on a monthly close below 16400. 

Nifty (5120.35): The index moved perilously close to the resistance zone of 5560-5620 mentioned last week. The trend turned bearish after the index touched a high of 5545 on Monday. The index appears on course to test the support zone of 4450-4600.

Given the overall market condition and the heightened volatility, it would be prudent to wait for price action to evolve before deciding about the reversal of the long-term uptrend. The long-term bullish trend would be in danger if the index registers a monthly close below 4600. The trend in the daily and weekly time frames have turned decisively bearish and it would be a safer strategy to consider short positions on rally at resistance levels. A quick move past 5650 is a prerequisite to reinstate bullish momentum.

CNX IT Index (3961.05): The index moved in line with expectations and touched the target zone of 4300-4320 mentioned last week. The short-term outlook is bullish and a move to 4400-4450 appears likely. A move past the immediate resistance zone at 4120 would confirm the bullish view. On the contrary, a close below 3820 could result in a retest of 3300-3400. A move to 4400-4450 is the preferred view as long as 3820 is not breached.

Key pivotals:
Bharti Airtel (Rs 883): Though the stock was unable to move past the resistance zone of Rs 990 mentioned last week, the bullish view remains intact. The stock is in the process of consolidation and the recent drop in volatility suggests that a sharp move may be round the corner. A close above Rs950 would impart bullishness and could help the stock clear the resistance at Rs 990. The bullish view and the possibility of a rally to Rs 1,200-1,250 would be invalidated on a weekly close below Rs 800.

ONGC (Rs 996.3): The stock moved to the target zone of Rs1,110-1,140 and reversed direction since Monday. Unless there is a swift rally past Rs1,210, the monthly trend would deteriorate and could push the stock to lower levels. Have a stop loss at Rs940 on daily closing basis for long positions and reduce longs at Rs1,100-1,120. Fresh long positions may be avoided till such time the stock clears Rs1,150.

Indian Oil Corporation (Rs 516): The stock moved up and almost hit the target zone of Rs550-560 mentioned last week. After moving to a high of Rs 445, the stock went into a consolidation phase. The short-term outlook is bullish and a move past Rs555 could lead to a rally to Rs605-610. A move to Rs605-610 would be the favoured view till such time the stop loss at Rs479 is not breached.

Stock of the week:
Noida Toll Bridge (Rs51.8): After a steady run up, the stock has fallen sharply in the past few weeks. The downtrend appears almost complete and the stock could see a pull-back rally in the short-term. The immediate support is at Rs47.5, followed by Rs43.

Long positions may be considered with a stop loss at Rs 47.5 on a daily closing basis. If this stop loss is hit, fresh positions may be considered at lower levels with a revised stop loss at Rs43. The stock would move to Rs63-95 range if the stop loss at Rs43 is not breached.

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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