The Hindu Business Line : Indices present bullish picture

Preferred view: The market movement was in line with expectations. The Nifty ruled firm and moved to the target zone of 2250-2300. The near-term outlook appears positive. The Nifty is headed towards the immediate resistance zone at the 2285-2295 range. A close above 2300 would help the index move to the 2320-2330 range.

Though the short-term outlook is positive, the index could get into a major corrective phase on the completion of the current upward move. The rally from the low of 1292.2, recorded in May 2004, appears to be in its final stages. A significant corrective phase may be just round the corner.

Though the expected corrective phase is unlikely to transpire in a hurry, investors need to be cautious about such an eventuality. Holders of long positions may have the stop-loss at 2220. A trailing stop-loss may be used in the event of the continuation of the rally beyond the 2300-point mark.

Comments: After being confined a narrow trading zone, the Nifty staged a breakout on Friday. The sideways consolidation, completed on July 14, would qualify as a "Wave 4" triangle in Elliott Wave parlance. This consolidation phase resulted in a perceptible drop in volatility.

As always, a drop in volatility would be followed by an expansion in volatility, which was evident on Friday. The rally on Friday appears to be start of the last segment of the rally that commenced at the low of 1896.3 on April 29. The index could get into short-term corrective phase, which could be either in the form of a drop to lower levels or a prolonged sideways price action.

Long-term view: The view expressed a couple of weeks ago remains valid. Though the index could get into a short-term corrective phase, the long-term rally is not over as yet. After the expected corrective phase, the index is likely to continue its upward march to the 2550-2600 range. The long-term positive outlook would be under threat if the index closes below the 2160 mark.

SENSEX (7423.25)

Preferred view: The price movement was in sync with expectations. As anticipated, the move past the resistance level at 7250-7260 helped the index move to the target zone of the 7300-7400 range. The short-term outlook appears bullish and a move to the next target zone of 7750-7800 appears likely. The short-term trend would turn bearish if the Sensex closes below 7150.

CNX IT (2984.95)

The short-term trend is bullish and the index could move to the immediate resistance zone of the 3040-3060 range. On the downside, the index enjoys support at the 2870-2890 range. The positive outlook would be in force as long as the index holds above 2830.

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