The Hindu Business Line : Index Outook

The big boys in the banking sector, State Bank of India and ICICI Bank, took the onus of pulling Sensex out of the quagmire in to which it was sinking. The blistering rally of over 10 per cent in these two stocks helped Sensex close above the 14300 mark.

There was a change in the market sentiment last week as caution gave way to a wave of optimism. The turnover in the cash segment on NSE touched record levels. Market breadth was good with the mid-cap and small-cap stocks participating with gusto in the market's ascent.

The bulls have wrested the advantage from the bears. The 10-week ROC moving deep in to the positive zone and the 14-week RSI reading of 62 indicate the continuation of the medium term move that began at 12425. This move gives the minimum target of 14764 for Sensex. A fall below 13600 is required to make the medium term outlook negative.

A brief glance at the long-term picture is warranted at this stage. A five-wave move has been completed from the low of 8800. The move since December 2006 has been a correction of this move. The fact that the correction retraced only 40 per cent of the rise since 8800 underlines strength in our markets. The point that remains unresolved is whether the move from 12425 is the resumption of the move from 8800 or part of the corrective move.

As per the first possibility, Sensex will go much beyond 15000 this year. But if this is part of a prolonged correction, there will be another reversal from 15000 levels and Sensex will spend 2007 oscillating between 12000 and 15000.

The next two weeks should resolve this quandary. For the week ahead, Sensex can move higher to 14505, 14639 or 14764. The short-term outlook stays positive till Sensex remains above 14047. The supports this week will be at 14047, 13859 and then 13554.

Signs of over-exuberance in the markets makes caution imperative. Traders should strictly adhere to their stop losses. Investors ought to be extremely quality conscious while picking stocks.

Nifty (4214.5)

Nifty made an intra week high at 4232 and ended the week with a doji formation. A new all-time high on Nifty next week is a foregone conclusion. The short-term targets are 4273 and then 4315. These targets would remain achievable as long as Nifty trades above 4136.

A move below 4136 would drag Nifty lower to 4076 and then 3981. But dip to the zone between 3980 and 4000 should be utilised by traders to initiate fresh longs with a stop at 3950.

The target of C-wave from 3617 gives the medium term targets of 4351. But keep trailing stops for all long positions as a reversal can occur at any point.

Global Cues

The DJIA is in an indefatigable mood. The weekly candlestick chart of the index since the March 2007 trough is spell-bindingly bullish with scarcely any reaction. If this is the fifth leg of the move from October 2005, the outermost target would fall at 13647. A move beyond would call for a revision in the long-term counts. Other global indices took the cue from the Dow and moved higher, but at a less animated gait.

Nymex crude is moving back towards the upper boundary of its current trading range at $67. But if the recent trough made on May 9 is the end of a flat correction, we can see the crude prices breaching the $67 ceiling this time.

More Stories on : Stock Markets | Technical Analysis | Outlook

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

Stories in this Section
How broadcasters script the growth story

Index Outook