The Hindu Business Line : Focus of the week

The share price completed the first leg of the upward move at Rs 95.4 in January 2004. The correction to this upward move appears to have been completed at Rs 52.45 in July 2004. The stock appears to have completed the first leg of Wave 3 at the latest high of Rs 145 in late December.

In Elliott Wave terms, the stock appears poised to get into third wave of Wave 3 (referred to as Wave 3 of 3 in Elliott Wave parlance). Typically, Wave 3 of 3 would be the strongest and sharp upward spikes would be quite common in this phase. If this view is valid, the stock is expected to breeze past Rs 200. Hold with a stop-loss at Rs 120.

Fresh buying may also be considered on price weakness with a stop-loss at Rs 122. A close below Rs 120 would negate the positive outlook.

Bombay Dyeing (Rs 220): The share price appears to be headed towards the Rs 255-Rs 260 range in the near-term. Taking into account the sharp rise on Friday, the stock is likely to see the continuation of the upward move. Hold with a stop-loss at Rs 195.

Fresh buying may also be considered on price weakness, with a stop-loss at Rs 195. The sharp drop in volatility witnessed over the recent days indicates that a sharp explosive move may be just round the corner.

Typically, volatility expansion is preceded by a contraction in volatility. When volatility expansion gets underway, a sharp movement in share price is inevitable.

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