On Friday May 9, 1997, the BSE 30-scrip Sensex closed at 3769.34 points, showing a net loss of 32.37 points over the close of the previous week. The week saw the index move in a narrow range. For about three weeks now, the index has been moving between 3880 points and 3739 points. The overall volumes have dipped a bit.

A series of disappointing corporate results has dampened the mood of the market traders. To compound the problems, the market has not reacted to a series of good news. A market condition that does not respond favourably to a piece of good news is a market that needs to be watched with some caution.

For the past 12 sessions, the index has been moving sideways. The internal composition of these twelve sessions shows that, eight sessions have formed candles with black real bodies, while four show candles with white real bodies. The relative size of the black candles is larger than the white candles. This reflects the underlying weakness in the market.

Last week, it was mentioned that the entire rise since April 1997 is contained within two rising converging lines forming a "rising wedge". The breakout on the downside took place last Friday, and the Sensex has gone into lateral range since. The indicators also show bearishness. The MACD (moving averages convergence divergence) is below its trigger line, giving a sell signal. The 12-day ROC (rate of change, not shown here) has dipped below its equilibrium level. The current market situation suggests caution. It is expected that the downtrend may continue, but before, that there may be some more sideways movement.

ICI (India) Ltd: A decent buy

Since mid-1994, ICI (India) is hovering in a fairly wide range of around Rs 220-120. The stock has started to rise after having bottomed out. The volumes have also shown a good increase. The MACD indicator of the stock is above its trigger, suggesting a buy signal. One may buy this stock for a minimum upside target of around Rs 220.

Dhampur Sugar: Bullish

This is one of the sugar several stocks which show a rise. After penetrating above its falling trendline, it has managed to rise above its previous top of Rs 68, accompanied by a higher increase in volumes. During the week, the stock opened with a gap compared with its previous week's close. This gap can be classified as a breakaway gap, a bullish sign. The MACD indicator of the stock is in a buy mode. Investment in this stock is recommended.

Coates Viyella: A good buy

This is one of those stocks that show a bullish potential. The stock has managed to rise above its falling trendline. The MACD indicator shows rising bottoms, a bullish sign. A small increase in volumes is also seen. There is a strong resistance level at Rs 90. The buyer is advised to wait till the stock manages to surpass this level.

Bajaj Auto: Sell short

Bajaj Auto has broken below its major support level of Rs 854 in Friday's trading. Friday's trading shows a heavy increase in volumes. A break below Rs 854 also means that the window formed on January 1, 1997, has been closed, which is a bearish sign. The stock could witness a further decline, and one may sell short. Keep a stop-loss level above Rs 854.

MTNL: Go long

MTNL has closed above its 13-day EMA (exponential moving average), a short-term buy signal. The momentum in the stock is quite strong. The scrip may witness a rise beyond its recent high. Traders may enter long. Keep a stop-loss level below Rs 280.

Copyright © 1997 Indian Express Newspapers (Bombay) Ltd.