During the week ended May 16 1997 the BSE Sensex closed at 3759 points, showing a net loss of about 10 points compared to previous week's close. This is the third consecutive week in which the index has shown a lower close. The volatility in the index has ebbed. The market continues in an indecisive phase. This is substantiated by the fact that the index opened at 3772 points and ended at 3759 points. As the open and the close of the week were nearly the same, on the weekly charts the Sensex has formed a 'near doji'.

The indecision in the market is understandable as the government has not been able to make up its mind about what has to be done with the burgeoning oil pool deficit. The meeting of the various government officials that was convened on May 15 did not reach a consensus. Another round of talks is scheduled to be held on May 25. Also the results of various corporate bodies have not been encouraging enough as the slowing down of the economy has started to effect their bottomlines. To preserve investor interest in their stocks, several corporates have started declaring bonus issues. The moot point is that if the economy continues to be sluggish, whether these corporates will be able to service enlarged equity. Nevertheless these questions pertain to long term.

The first two days of the week saw a steady deterioration in the index. The Sensex found a bit of support at 3690 points. On the chart, it is noticed that there is a small gap at this level which was formed in mid-April. The high of the Sensex in the last two trading days were almost the same at around 3769 points. This has formed a pattern called as the 'tweezers top' a bearish pattern. But for this pattern to succeed there has to be some more confirmation.

The trend in the index is mainly sideways and the next week may be no more different. Therefore traders have to look for small but quick profits. Also the volatility is restricted to a few scrips. This means that the traders have to be very careful in selecting the stocks in which to trade.

Goodricke: A medium-term buy

Notice in the chart of Goodricke that the stock has formed a higher bottom and has broken above its previous high. This indicates a change of trend. There is an appreciable increase in volumes. The 12 week ROC (Rate Of Change) indicates very strong momentum.

The higher reading in momentum indicator has not been seen for a long time. This stock may show a very strong rise and investment is recommended.

Tata Tea: A good investment

Tata Tea is also another investment in the tea industry that is showing a good potential. Notice in the chart that the stock has managed to surpass above its major resistance level of Rs 267 accompanied by higher increase in volumes. The MACD indicator (Moving averages convergence divergence) is moving into positive territory giving a buy signal. One may invest in this stock. Vesuvius Ind: Wait for the breakout Vesuvius is another stock that is showing improvement. The volumes are showing a rise when the stock is rallying a sign that the up trend is healthy. The stock has still not managed to move beyond Rs 87 a major resistance level. Prudence suggests that the stock should move beyond Rs 87 before buying into this stock.

L&T: Go long

Wednesday's trading in this stock has formed a 'Hammer' a bullish candlestick pattern. This bullish pattern was confirmed buy a white candlestick in the next trading session. The 8 day RSI (Relative strength Index) of the stock is moving up from its over sold zone. Traders may enter long into this stock. Keep a stop loss level below 200.

HLL: Go short

Notice in the chart of Hindustan Lever that the stock has formed a bearish candlestick pattern known as the "Evening star".The rise in this stock is very weak as seen from the 12 day ROC which has been showing a series of bearis negative divergences. Lever may witness a violent down move. Keep loss level above Rs 1100.

Copyright © 1997 Indian Express Newspapers (Bombay) Ltd.