March 20: On Friday, the BSE Index closed at 3,840.40 points. Compared with the previous week's close the index showed a net gain of around 124 points. The movement in the index for most part of the week was sideways as the traders awaited the appointment of the finance minister. Several stocks, during the course of the week, recorded handsome gains. The attention has for the time being shifted from major pivotals to some lesser-known stocks. It now looks that over a long period the stocks that were hammered down badly over the last couple of years are going to be major movers.After months of speculation India finally got a new prime minister. Atal Bihari Vajpayee has sought to accommodate representatives of all his allies into his cabinet. Perhaps this is his way of rewarding the supporters of BJP.
The important position of the finance minister has gone to Yashwant Sinha, whereas commerce has gone to Ramakrishna Hegde. The newly-elected party has a task on its hands as it will have to do somethingspecial to kick-start the ailing economy. Much is expected of the BJP and for the betterment of the country as a whole, one hopes that they will fulfill the peoples' expectations. During most part of week, the political climate in the capital was quite unpredictable. The uncertainty was reflected in the movement of the index as in most of the sessions the index manifested a series of small bodied candle sticks.
Last week we had anticipated that the index should decline, but the movement of the market proved that the analysis presented was slightly off target. Instead of a decline the index went into a sideways action. To be a good judge of the market it is necessary that once the market is not behaving as per one's anticipation, a corrective action is taken at the earliest. We cannot afford to override reality. The action of the market on Friday suggests that there may be a bit more steam left in the current rally. The Friday candle was a long candle which is a bullish sign.
If one takes a close look atthe chart, there is a small gap at the level of 3,914 points. It is at this point that we expect the market to face resistance. The 14-day RSI (Relative Strength Index) has started to move up after giving a false sell signal. It is expected that the index should rise in the forthcoming few sessions. Depending on the signals available at higher levels we will try to pinpoint the probable reversal point.
GIC Housing Finance: Long-term bet
Over the last couple of weeks, housing-finance companies have been on a roll. This stock seems to be a latecomer to the party. The stock has broken above its long-term down trendline with an appreciable increase in volumes. Since September 1997 the movement in the stock resembles a rounding bottom, this is a reversal pattern. The stock has already staged a breakout from this pattern. The MACD (Moving Averages Convergence Divergence) is in a buy mode. This stock has a good long-term potential and investment is recommended. Keep a stop loss below Rs 18.
Siemens:may move upwards
This stock has shown a breakout from what appears to be an inverse head-and-shoulders pattern. On the daily charts (not shown here) this pattern is seen more clearly. The 14-week RSI has started to move up from its oversold zone and has already given a buy signal. Once the stock moves beyond it could easily rise up to around Rs 350. One may consider buying this stock once it moves above Rs 210. Keep a stop-loss level just below Rs 185.
Telco: good potential
This stock has broken above its falling trendline accompanied by a good increase in volumes. The weekly MACD has also given a buy signal. Over a period of time this stock could rise to around 375 levels. Investors may consider investing at current levels. Keep a stop-loss level below Rs 260.
Castrol: Go long
This stock is in the last days of its no-delivery period. On Friday the stock recorded minor gains. But it has formed a bullish engulfing pattern. The stock could rise up to around 730 in the forthcomingweek. Traders may buy long. Keep a stop loss below Rs 693.
ICICI: may rise
Since the last three weeks this stock is moving in a range of Rs 88.5-Rs 93.5. Currently, the stock is just above its lower level. Friday's trading in this stock formed a `star'. This could act as a reversal pattern. Traders may buy this stock at around Rs 88 for a targeted price of around Rs 93.5. Keep a stop loss level below Rs 85.
Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.
