On Friday February 6, the BSE Sensex closed at 3,366.70 points. As compared to its previous week the index gained 136 points. Last week, the market the overall trading was dull and the market witnessed a drop in the volumes. Several market participants are unwilling to make long term commitments as economic situation remains unsteady and the developments on the political side are still uncertain. A significant development that is taking shape in the world as the US prepares to go to war against Iraq. In 1992, the last time it happened the Indian stock market witnessed a strong bull market.
But this time it is unlikely that the situation will be repeated. In fact it was the statement of the Russian Premier Boris Yelstin that US-Iraq conflict could lead to World War III, that caused the debacle in our stock market on Tuesday. It is still not clear whether the war will take place. But one certainly hopes that, sanity prevails and an armed conflict is avoided.
Last week it was expected that the marketshould stage a rally and the index on the first trading day of the week could open with a gap. This is what happened. The Sensex witnessed an extremely strong session on Monday when the index opened with an upside gap and went on to higher levels. In the following sessions the index could not consolidate its gains and it went into a trading range.
With the trading range so narrow the trading becomes a chore and the chances to make significant profit declines sharply.
The indicators are in a buy mode. The MACD (Moving Averages Convergence Divergence) has given a buy signal. The 14-day RSI (Relative Strength Index) has also started moving up from its oversold zone.
The market can be expected to rise over next couple of sessions and could trot to around 3,525 points. But, before this the market could be expected to remain in range of 3310-3400 points for some sessions. Traders may enter long once the index crosses 3400 points. We do not expect a sustained up move and the index could reverse direction athigher levels.
ABB: Buy on upswing
Notice in the chart that this stock is at its December 1996 low of Rs 345. This is a major support level and the manner in which stock has been hammered, this stock can witness an equally sharp up move. The 10-week RSI also shows a positive divergence. On the daily charts ( not shown here) this stock has formed a bullish candlestick pattern. One could consider buying at a level of Rs 350, for an upside target of around Rs 425 in about four weeks' time. Keep a stop loss level below Rs 340.
BPL: Good potential
This stock is ready for take off to higher levels. It has been attracting very heavy volumes.
The initial breakout beyond the level of Rs 85 has already taken place with strong rise in volumes. Last week, the stock witnessed very strong session and can be expected to rise further.
The initial target for this stock is Rs 120 and if, there is a breakout beyond this level its can rise further. One may buy at current levels. Keep a stop loss belowRs 85.
Sterlite: Invest at current levels
Similar to the price movement in ABB this stock is also near to its December 1996 low. This is a major support level from where this stock could reverse.
One may consider buying once this stock manages to quote above Rs 150. The stock price may hit a target of around Rs 200 in a medium term. One may invest at current levels. Keep a stop loss level below Rs 140.
Hindustan Lever: Sell short
Friday's session in this stock formed a 'doji'. This pattern suggests reversal of trend. Traders may sell short at current levels. Keep a stop loss level above Rs 1,435.
Oriental Bank: Go long
This stock has broken out of Rs 62 a short term resistance level. This stock does have the potential to rise. Traders may buy. Keep a stop loss level below Rs 60.
Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.
