July 14: The Sensex gained 50 points on Tuesday to close at 3372 -- the recovery should be treated as a natural consequence of Monday's steep fall. And despite this recovery, the reaction process should still be considered on. The Sensex opened at 3335, 13 points over the previous close of 3322. But on the upside, it could gain only 37 points to post an intra-day high of 3372. In contrast, on Monday the flare-up was as high as 3461. Tuesday's low was 3311, which was significantly lower than Monday's low of 3320. Therefore, the recovery of the index is not unduly bullish.
One has to wait and see if the operators at NSE decide to play bull or bear. Ideally, the technical reaction that has started should go down some more. In such a case, the market can have a healthy bounce. On the other hand, if values start moving up now, that will be building up on a somewhat unsure foundation.
Should the Sensex move down further, the bull uptrend should be considered still intact, even if the Sensex reaches as lowat 3240, which is another 130 points down.
The index has a good chance of bouncing off at that point. Also, it may not go down all the way upto that figure. It could also find support at 3278. The moral of the story is that the current reaction has not harmed the bullish undercurrent. The reaction can be considered as a good opportunity to pick up scrips at a lower price.
By the same token, those who are in profit may continue to press sales. If you are in profit, it would be better to err on the side of booking your profits. And it would be prudent to wait to see clear signals of the ending of the reaction before you buy in again. On the daily chart the stochastics continues to signal a sell. The weekly charts are, however, bullish. What this means is that long-term buyers should use the dip to accumulate their stocks.
Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.
