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Manish Shah
On Friday September 17, 1999, BSE Sensitive Index closed at 4618 points. The index showed a net loss of 152 points over the close of the previous week.
The trading week was truncated due to a holiday on Monday and as such the trading week was only for four days. The index fell during the early part of the week due to sustained selling by all and sundry. But the sell-off was largely contained due to the rally that took place on the last day of the week. The rally was sparked off by a lot of buying interest in the software counters. It was once again, the old tried and tested counters of Satyam Computers, Pentafour Software etc. The rest of the market followed.
The rot in the market started due to the awakening that the BJP government may, after all not be able to secure a thumping majority as it was made out to be. But as long as there is going to be a stable government, the market should welcome this development. The second factor that unnerved the market participants was fear of a price hike ofpetroleum and its derivative products. A hike in the price of oil could result in an all round jump in inflation which for the new government would be a very unnerving factor.
Last week, we had mentioned that the market could decline once it broke below the level of 4688 points. The index once it broke below the level of 4688 points the index declined to around 4513 points. The current week was a very eventful week. The index commenced on a very weak note and it saw a sustained decline over the period of three trading days. Friday's trading was a key reversal day as the index made a new low as compared to the previous days low and then rallied on to make a new high.
In terms of Japanese candles, this was the `piercing pattern'. This is a bullish pattern and this pattern has occurred just above the support level of 4470 points. This is the key level; the level of 4470 points. A lot depends on what the market does at this level. The index has seen a major up move since last November. Looking at a slightlylonger period, one sees that the index is moving in a range of 4810 points on the upside to 4470 points.
This 450-point range is going on since early July 1999. Whether this consolidation acts as a reversal pattern, i.e. trend moves from up to down, or this pattern acts as a continuation pattern i.e. the trend moves up, is the moot point. This depends on the breakout. If the index breaks above the level of 4810 points then one may expect a rally. If there is a decline below 4470 points then one may expect a decline to continue. Much depends on the which side the breakout takes place. The indicators have dipped to their oversold zones. 14-RSI (Relative Strength Index) has dipped to its respective lower levels.
Notice in the chart how the index has reversed whenever 14-day RSI has registered a reading of around 40. The MACD is in a sell mode but it is still above its trigger line. The index may rally to around 4965-4710 levels and if its manages to break above its falling trendline then it could rally toaround 4810 levels.
McDowell
The price of this stock has registered new level as it has crossed above the highest level recorded ever of Rs 127. The price of the stock seems to be in a major up swing and the price of the stock may rally to around Rs 200 in the long term. One may buy the stock at current levels. Keep a stop loss below Rs 110.
Hind Zinc
The Price of this stock has broken out of Rs 21.5 a strong resistance level. The price of the stock does show a potential to rally to around Rs 40-Rs 45 in the medium term. One may consider buying this stock at current levels. The volumes have seen a major pick up on breakout. One may buy the stock at current levels. Keep a stop loss below Rs 21.5.
Thermax
The price of the stock has returned to its breakout level of Rs 211. At this level the price seems to be a very attractive buy. From current levels the price may again rally to around Rs 300. One may consider buying this stock at current levels. Keep a stop loss below Rs208.
Grasim
The price of this has broken above its previous high of Rs 474. The price does show a potential to rally above the level of Rs 525 in the short term. One may buy the stock at current levels. Keep a stop loss below Rs 570.
Digital Equipments
The price of the stock has broken out of the Rs 690 a major resistance level. The price of the stock can see a rally to around Rs 748. One may buy the stock at current levels. Keep a stop loss below Rs 690.
The author can be contacted at shahmani1@yahoo.com
Copyright © 1999 Indian Express Newspapers (Bombay) Ltd.
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