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Manish Shah
On Friday, the BSE Sensex closed at 3441 points. The index showed a major loss of 245 points over the close of the previous week. The fall in the index values came very fast, and many were not able to get out of the market. The crash in the value of indices also caused a major psychological setback to most traders. With such a nerve-wracking experience, it is going to take some time for the market to come to come back on its feet. Not many were expecting such a crash in a bull market in its full bloom. As such, when the index started to taper off slowly, everyone thought that this was just normal correction. The market was carrying huge outstanding long positions for quite some time. With the badla rate reaching astronomical levels, it was only a matter of time when the bulls would feel the heat and on a slightest sign of danger, everyone would join the seller's bandwagon.
The political situation turned for the worse with Jayalitha once again acting spoilsport. This is the umpteenth time she has threatenedto withdraw support to the BJP government. This time round, BJP has, for once, refused to buckle under pressure. The political situation has often been a culprit and several rallies in the past have terminated due to murky political developments. Since last two weeks, we are expecting a slide in the market. This week's market action proved our fears right. In fact, if one had heeded our advice, he would have been able to make an exit exactly at the top. As students of price action, what we have to do is get the direction of the market right. We cannot do much about the speed as the market can get very volatile without any warning and the move in the direction of the trend at a very fast pace. But as long as we identify the market direction correctly, we have won half the battle.
The index is now poised at very interesting levels. Notice in the charts that the index is poised just above the rising trendline. The point at which the trendline touches the rising trendline is at 3420 points. Also, there is a gapbetween 3417 points and 3400 points, which could act as a support level. And last, the level of 3400 points is a very important support level (See the horizontal line on the chart). Thus, there is a chance that the index may turn a bit from this level. What we expect to happen is that on Monday, the index may dip below the level of 3400 points to around 3375 to 3361, and from here, the index may stage a bit of recovery. But if the market breaks below the level of 3400 points and then goes below the level of 3361 points, we could see a dip to around Rs 3281 points. The market has seen one major sell-off. The psychological impact of this will be very tough to forget in a hurry. Because of this, we do not expect any immediate rally in the market. And we expect a sideways movement for some time to continue.
The indicators have just started to dip below their equilibrium levels. The 14-day RSI (Relative Strength Index) has just dipped below the equilibrium level. The MACD (Moving Averages Convergence Divergence)is just above its equilibrium level. The indicators do not offer many clues to the market action. Much depends on how the market behaves on Monday. Traders have to watch out for the support of 3400-3360 points. If the support level stays, there is a chance that the index could rally to around 3525 points. But if the index breaks below the level of 3361 points, we could see a decline to around 328 points.
Britannia Industries
This stock has seen a dream run in last six months or so. For the first, we have seen a long black candle appearing on the weekly charts. On the daily charts, the MACD has given a sell signal. The price could decline in the coming days and the holders of the stock may consider booking profits.
Voltas
After witnessing a huge move, the price of the stock is in moving in a range of Rs 93 to Rs 115. This is a good 20 per cent range and medium term traders could buy this stock around Rs 93 and look to sell around Rs 115. The current price of this stock is just above thelower end of the range and one may consider buying this stock around Rs 93 for a target of Rs 115. One may increase their positions if the price breaks above Rs 115. One may buy with stock with a stop loss below Rs 90.
Indian Shaving
On the daily charts, the price has just broken below the rising trendline. The weekly RSI shows a breakout on the downside from a double top. This is a bearish sign. The price could decline quite a bit in due course. One may consider booking profits as the stock could decline in value. ACC: Buy longThough the market has shown a substantial decline, this one has remained rock steady. Traders may consider buying this stock at current levels. If the stock could rally to around Rs 1500 and break above Rs 1500, the price could rally to around Rs 1600. One may buy with a stop loss below Rs 1425. Bajaj Auto: Sell short
The price has broken below the support of Rs 573. It could decline to around Rs 570. One may sell short. Keep a stop loss above Rs 575.
Copyright © 1999 Indian Express Newspapers (Bombay) Ltd.
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