On Thursday March 12, 1998, the BSE Sensex closed at 3716.50 points. As compared to the close of the previous week the Sensex showed a minor gain of eight points. Thursday was the last trading day of the week as the market remained closed on Friday on account of Holi. The bullish fervour that was seen in the initial days of the week received a setback as the problems on the political front emerged. The political equations at the Centre still remains unsolved as BJP struggles to add the requsite numbers as Jayalalitha led-AIADMK has not furnished the letter of support. With BJP's strength reduced to 240 the President has also invited Congress and UF for talks.The second major development that took place was the prosecution of Hindustan Lever and five of its officials by Sebi for insider trading. This is the first time that the regulatory authority has taken action against a company for trading on insider information. This is a good development and it will certainly help in fostering a cleaner stock marketenvironment.
Another point that emerges from this is that every one wants to make a quick buck in the market. It does not really matter whether it is a big corporate body or a small time speculator. The attitude is the same only the size of the trade differs.
Last week, we had stated that the index faces overhead resistance at around 3800 points. Unless the index manages to rise beyond this level it is unlikely that the rally will continue. During the week the index made a high of 3830 points on Tuesday before a bout of profit taking took place. Largely the movements of the index during the week were narrow and bounded within a range. This type of movements indicate the uncertainty in the market. This is understandable considering the nature of political scene in the country and the statements made by George Fernandes did not exactly boost the market sentiment. Since its February bottom of 3164 points the market has rallied by around 650 points. This makes it ripe for a little bit of decline. Theindicators are in the overbought zone.
The 14- day RSI (Relative Strength Index) has shown a negative divergence followed by advance breakout from its rising trend-line. This is a bearish sign and it signals that the market may stage a short term decline. A break below the level of 3,670 points could take the market down to around 3,500 points.
LIC Housing Finance: Buy signal
The weekly MACD (Moving Averages Convergence Divergence) in this stock has given a classic buy signal. The weeks trading saw the scrip record impressive gains with an increase in volumes. The stock does show a potential to rise to around Rs 75 once it manages to break beyond Rs 45. One may consider buying this stock at current levels. Keep a stop loss below Rs 22.
Philips India: Bullish
This stock has just broken above its resistance level of Rs 99. This stock is another case where bad results do not necessary cause a decline in the price of the stock. Nevertheless the stock has been attracting only buyers inrecent times. The 12 week ROC (Rate of change) shows a very strong momentum One may consider investing this stock at current levels for a decent appreciation. Keep a stop loss below Rs 85.
HDFC: Await breakout
The sideways action of the stock since October 1997 is a classic basing formation. Currently, the weekly chart of the stock shows that the stock is on a verge of staging a breakout once it moves up beyond Rs 3200 levels. The weekly MACD has given a buy signal. But analysing the price movements on the daily chart (not shown here) it does seem likely that the stock could drift in a range for some more time. The strategy in this case would be that if the stock declines to below Rs 2900 than one may consider buying at around Rs 2650. Or if there is a breakout beyond Rs 3200 one may consider buying at this level.
BHEL: Go long
This stock is just above its rising trendline, where it could find support. The stock does show a potential to show a rally to around Rs 320 in next couple ofsessions. Traders may enter long. Keep a stop loss below Rs 302.
BPL: Sell short
The stock has shown signs of weakening as the indicators are in the overbought level. Traders may sell short at current levels for a targeted price of around Rs 127. Keep a stop loss level above Rs 142.
