February 28: On Friday, February 27 1998, the BSE Sensex closed at 3622.22 points. As compared to the close of the previous week the Sensex closed at 3622.22 points. As compared to the previous week the index staged a smart appreciation of 145 points. Some stocks have recorded a massive gain in the prices as the rally percolated down to some of the lesser known stocks. Another factor of interest is that some of the stocks which have been heavy losers over past couple of years have either bottomed out and certain trend reversal characteristics have been already seen in them.The rally in the market has come in the wake of elections. Considering this it seems unlikely that the outcome of the elections is going to have a major impact in the long term direction of the market. It is not yet clear which party is going to win but it seems that the BJP is the favourite. The verdict of the market is clear, irrespective of whoever comes to power the market will gather strength in the forthcoming weeks. Anotherpositive factor that acted as a catalyst to the rally is that that after the sudden turn of events in Utter Pradesh and the timely intervention of the courts of law reinstating Kalyan Singh as chief minister was a major victory for the BJP.
Lastly the fears of a war in the Gulf have subsided, and possibly fear of an armed conflict has been averted.
Last week, it was expected that the market once it breaks above the level of 3466 points, the market could rally to around 3525 points. The rally extended very much beyond our expectations as the index recorded impressive gains.
The tremendous force with which the market staged the rally, it held little respect for the resistance level of 3525 points. Also the index has broken above the falling trendline indicating a major reversal of trend. The index faces a major resistance barrier at around 3800 points. It is at this level that the index could face a major resistance. The last two sessions of the week have shown an exceptional strength in the market andwe, if we may venture out to say, it is quite likely that the index will not touch the February 1998 low of 3168 points for a long time to come.
Most of the indicators are showing bullishness in the market. The 14 day RSI (Relative Strength Index) is and the 12 day ROC (Rate of Change) is showing a rising trend.
It is expected that the market will gather strength in the forthcoming weeks, notwithstanding certain short term corrections. Traders may open long positions and on the whole stay on the long side of the market.
Esab India: Likely to appreciateNotice in the accompanying chart of Esab India that this stock is currently poised at its long term rising trendline. This week the price has formed a long candlestick which is a bullish sign. The weekly MACD (Moving Averages Convergence Divergence) is just on the verge of cutting above its trigger line giving a classic buy signal. The stock faces initial resistance at around Rs 120 and once this stock manages this level it could go up to around Rs140. One may consider buying this stock at current levels for a decent appreciation in price. Keep a stop loss below Rs 95.
United Phosphorous: Good potentialOn the monthly charts (not shown here) this stock has formed a 'Doji'. This pattern can act as a significant reversal signal. One more noticeable factor in the price chart of this stock is that the volumes have picked up quite significantly, but the price has not seen a proportionate deterioration. This could mean that the selling pressure is being absorbed. The 14 week RSI has given a classic buy signal. This stock could rise to around Rs 150 in the medium term and buying is recommend. Keep a stop loss below Rs 85.
Finolex Cables: Going strongThe stock's price has successfully thrice tested the low of Rs 106 suggesting a lot of buying interest at this level. During the week the stock broke above its falling trendline accompanied by heavy increase in volumes. This breakout suggests reversal of trend. The 12 week ROC shows a very strongup move in progress. Over a long period this stock can achieve a phenomenal increase in value. Buying is recommended. Keep a stop loss below Rs 110.
State Bank: Go longThe stock has broken above its resistance level of Rs 256 suggesting an up turned in the stock. One may buy for quick appreciation. Keep a stop loss below Rs 252.
Castrol: Bullish fervourThis stock has broken above its resistance level of 691 suggesting bullishness. Traders may buy long. Keep a stop loss below Rs 690.
Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.
