During the week ended July 11, 1997, the BSE Sensex closed at 4,321.98 points. As compared with the close for the week ended July 4, 1997, the Sensex has not shown much of an improvement and as such the index failed to register significant gains during the week.

The Sensex was rangebound throughout the week. It seems that the government has finally agreed to do something about the hike in oil prices. The delay in taking any decision on this front is probably because the problem has now become so acute that any decision would cause chaos in the country.

It is political compulsions that always dictate policies with economic rationale taking a back seat.

Analysing the movements of the Sensex during the week, it was observed that on Wednesday, July 16, trading was the strongest as the index gained around 92 points in a single day's trading session. This was the strongest day during the week but the gains were washed out in the next two trading sessions due to some profit-taking. The last session was very bearish as it resulted in a black candle having a small lower shadow.

On the weekly charts (not shown here) it is seen that the current week's trading resulted in the formation of a `Doji' as the opening and the closing reading of the index were at almost equal levels. Also the 14-week RSI (Relative Strength Index) is in an overbought zone. A `Doji' in an overbought zone can be dangerous.

Coming back to the daily charts, notice that the 14-day RSI has started to move down from its overbought zone. A classic `Failure Swing' is also noticed. Though the 14-day RSI has shown an advance breakout on the down side, this has still to materialise in the index.

For the signal in the indicator to have the desired effect it is necessary that some sort of confirmation is obtained in the index. This confirmation could be in the form of breaking of the rising trend line. Currently, the Sensex is poised at its rising trendline.

A crucial break of the 4,252 level would herald a short-term reversal and the Sensex could decline to around 4,175.

Astra IDL: medium-term buy

Pharmaceutical companies are on a roll these days and Astra IDL is one of them.

The stock shows a breakout beyond Rs 220, a major resistance level.

The volumes also show an increase. The 12-week ROC (rate of change) also shows a very strong momentum.

This stock shows a good potential to rise and investment is recommended.

Esab India: Invest on declines

The last two weeks have been very good for Esab India. The stock managed to breakout beyond Rs 113, a major resistance level. On the daily charts (not shown here) the stock has formed a bearish candlestick pattern and is likely to show a short decline. One may invest for the medium-term on declines.

BASF India: Good potential

BASF India has broken out of its resistance level accompanied by an increase in volumes. The weekly MACD (moving averages convergence divergence) is in the positive territory and is above its trigger line. This stock has the potential to rise to Rs 320 over a medium-term and investment is recommended.

L&T: Go long

The stock has broken above Rs 265 level and seems to be heading for the Rs 280 mark. Short term traders may enter long at current levels. Keep a stop loss level below Rs 265.

G E Shipping: Sell short

G E Shipping has shown some weakness at higher levels. Note the appearance of the bearish `Dark cloud' cover during Wednesday's and Thursday's trading. This was followed by another black candle. The 8-day RSI has started to dip from its overbought zone. One may sell short. Keep a stop loss above Rs 52.

Copyright © 1997 Indian Express Newspapers (Bombay) Ltd.