The Hindu Business Line : Index outlook

The market action was marked by a high degree of volatility during the week. After a sharp rally on Monday, the trend turned bearish in the next couple of days. The trend reversed again with the indices recording a sharp rally on Friday.

The market action during the week has tended to confirm the view of a rally to 3230-3230.

Last week's revised view of a probable rally to 3450-3500 appears to be gaining strength. A close past 3200 would be an early indicator of the extension of the long-term upward trend. The index is likely to get into a short-term corrective phase after it reaches the resistance zone at 3220-3230.

The positive outlook will be in force as long as the index holds above the negative trigger level at 3030. A weekly close below 3030 would be an early sign of weakness. On the contrary, a close past 3200 would almost confirm the possibility of a rally to 3450-3500.

For the moment, investors may remain long with a close stop-loss in place in the index stocks.

Comment

Though the index displayed a high degree of volatility, quite a few stocks managed to log sharp gains for the week. The list includes stocks linked to the infrastructure theme. Companies such as ABB, Crompton Greaves, Siemens, IVRCL Infrastructure and Nagarjuna Construction were prominent gainers.

Companies in the cement industry too caught the attention of the market players. The rally encompassed large companies such as ACC, Grasim and Gujarat Ambuja to relatively smaller ones such as Mysore Cement, Prism Cement and Mangalam Cement. Taking into account the chart patterns of these stocks, there appears to be upside potential even from prevailing levels in most of these stocks.

Sensex (10765)

The index ruled firm and also moved past our target zone of 10700-10720. As observed last week, the close past this range on Friday has imparted strength and the Sensex appears to be headed towards 11500-11700. The positive outlook would under threat only on a close below 10100.

CNX IT (4082)

The anticipated bearish trend materialised during the week. The index failed, however, to move to the support zone at 3800-3820 that was mentioned last week. It turned direction after having dropped to a low of 3924 on Thursday. The short-term outlook is positive and a move to 4175-4200 appears likely. A close above 4120 would confirm the positive outlook while a close below 3975 will reinstate the bearish trend.

CNX 500 (2765)

The index moved in line with expectations. The trend remained bullish and the index moved to the target zone at 2750-2800. The near-term outlook is positive. A move to 2850-2875 appears likely. The positive outlook for quite a few mid-cap stocks tends to confirm the bullish view for the index. Only a close below 2670 would negate the positive outlook.

Balrampur Chini (Rs 158.4)

The stock ruled firm and also moved to the target zone of Rs 175-180 that was mentioned last week. After touching a high of Rs 175.4, the trend turned bearish since Wednesday. The recent price action indicates that the stock has further upside potential.

A move towards Rs 180-185 appears likely. The positive outlook would be in force as long as the stock holds above the support zone at Rs 145. Remain invested with a stop-loss at Rs 145. Fresh exposures may also be considered in the Rs 152-156 range with a stop-loss at Rs 145. A close below Rs 145 would be an early sign of weakness, while a close below Rs 139 would delay the start of the next leg of the upward move.

Glaxo Smithkline Pharma (Rs 1,357)

The price movement was not in line with expectations. Except for a rally on Monday, the trend remained bearish in the next three days. The stock managed to hold above the stop-loss level at Rs 1,290. After touching a low of Rs 1,295, the share price recovered ground on Friday.

The outlook remains positive and a move to Rs 1,575-1,600 appears likely. Fresh exposures may be considered at prevailing level; stop-loss may be placed at Rs 1,290. Shareholders may remain invested with the same stop-loss. The positive outlook would be under threat only on a close below Rs 1,240.

(Note: The analysis and opinion expressed in these columns are based on the technical analysis of the past price behaviour. Opinion and price targets are based on the Elliott Wave Analysis. The stop-loss level provided with the recommendation is important. The original view would stand negated if the stop-loss level is breached. There is a risk of loss in trading)

More Stories on : Technical Analysis | Stock Markets

Article E-Mail :: Comment :: Syndication :: Printer Friendly Page